Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Buyers of Thai distressed assets plan big purchases as debt payment holiday ends

Stock MarketsOct 22, 2020 05:45AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Coronavirus disease (COVID-19) outbreak, in Bangkok

By Orathai Sriring and Satawasin Staporncharnchai

BANGKOK (Reuters) - A pandemic-exacerbated surge in Thai bad loans to nine-year highs and the end of a debt payment holiday are prompting buyers of distressed debt to embark on a shopping spree in Southeast Asia's second-biggest economy.

About 6.89 trillion baht ($221 billion) of outstanding Thai debt - or 42% of total lending - has been under relief programmes that include payment deferment and reduction, interest rate reduction and restructuring.

The most significant of these - a government-mandated six month debt payment holiday - ended on Thursday.

The Bank of Thailand has said it does not expect sudden and large defaults, but its former chief Veerathai Santiprabhob, whose term ended last month, warned in August bad debt could jump as the economy slumped.

The country's biggest distressed debt manager, Bangkok Commercial Asset Management (BK:BAM), told Reuters it will spend 12 billion baht to acquire sour loans with a face value of about 40 billion baht this year.

"We will focus on buying debt this year and next," Bunyong Visatemongkolchai, the bank's executive board chairman said, adding it planned to issue 25 billion baht of bonds to fund purchases.

Its shares are up 11% this year, versus a 23% drop for the main stock index (SETI).

Easy credit for consumers and businesses for years have prompted many warnings about the dangers of the household debt malaise in Thailand. Those are now proving prescient as the pandemic batters businesses, leaving as many as three million people without work.

Thai household debt is among Asia's highest, at 83.8% of GDP as of June, the highest level since 2003, while the central bank predicts the trade and tourism-dependent economy could shrink by a record 7.8% this year.

Months of protests against the government and the monarchy could further slow a recovery for the economy.

For a graphic on Thailand's economy and tourism:

https://fingfx.thomsonreuters.com/gfx/mkt/xlbvgjmjepq/Pasted%20image%201601392642559.png

Thailand's non-performing loans amounted to 509 billion baht as of June, a nine-year high of 3.09% of total lending, versus 2.98% at the end of 2019. Loans with a significant increase in credit risk hit 7.48% of lending, up from 2.79% at the end of last year.

Banks prefer keeping distressed assets in house to avoid expensive write-downs, but sometimes see no option but to sell.

For a graphic on Bad loans at Thai banks:

https://fingfx.thomsonreuters.com/gfx/mkt/xlbpgjmlevq/Pasted%20image%201601390972890.png

"We will sell debt of businesses that have no potential," said Atipat Asawachinda, first senior vice president of Kasikornbank (BK:KBANK), which plans to offload 10 billion baht of bad debt this year.

JMT Network Services (BK:JMT), the biggest buyer of distressed consumer loans, will spend a record 6 billion baht buying debt this year, CEO Sutthirak Traichira-aporn said.

"The amount of debt being sold in the market is so great that we don't have time to choose," he said, noting it had acquired debt with a face value of 12 billion baht at an average 84% discount in the first half.

JMT's shares have surged 66% this year.

Sutthirak said relief measures had only delayed the souring of loans, likening them to holding water behind a dam, "If there is too much, it will break out".

Buyers of Thai distressed assets plan big purchases as debt payment holiday ends
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email