[PPT] - Before and during the Crisis - Savings Bond objective is the PowerPoint Presentation

SLIDE 1

THAILAND

Mr. Suwit Rojanavanich

General Director of Public Debt Management Office Ministry of Finance, Kingdom of Thailand

Savings Bond : Developing for the Future

To be the Safe Haven for our Retail Investors

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SLIDE 2

500,000 1,000,000 1,500,000 2,000,000 0% 35%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2024 2025 2026

Proportion of Household and Non-profit in Government Debt Securities

MB 4%

Savings Bond Outstanding

% of Investors in Government Debt Securities

150,791 MB

0-

Savings Bond outstanding in Thai bond market

158,791 MB

(at the end of September 2016)

Government Debt Securities

(Classified by Types of Investors)

Today

29% 4%

25,000 MB 366,490 MB 424,311 MB 381,796 MB 483,839 MB

61,214 MB 19,511 MB Contractual Funds 27% Insurance Company 28%

NR 13%

Depository Corporation 14% Financial Institution 3%

Bot 6%

Mutual Funds 2%

Other 1%

Before and during the Crisis

Savings Bond was the main instrument for government funding

After the Crisis

Savings Bond objective is the instrument for retail investors
Savings Bond coupon needs to top-up 80 to 120 bps
ver the government bond yield
Maintain Savings Bond for the future urgent funding needs

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SLIDE 3

Changes of Savings Bond Issuance in the Last 10 years

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016

Issuance : Twelve times

(Every month)

Issuance : One time Issuance : Two times Issuance : Five times Issuance : Three times Issuance : Two times Issuance : Three times Issuance : Three times Issuance : Two times

2,000 4,000 6,000 8,000 10,000

Tenor : 3-year

2,000 4,000 6,000 8,000 10,000

Issuance : Twelve times

(Every month)

Max. Size : THB 80,000 million
Max. Size : THB 500 million
Max. Size : THB 500 million

Tenor : 3-year Tenor : 5-year Coupon : Fixed Coupon : Fixed Coupon Type : Step-up

20,000 40,000 60,000 80,000 100,000 5-year THB Million THB Million THB Million 10,000 20,000 30,000 40,000 50,000 3-year 5&10-year THB Million 10,000 20,000 30,000 40,000 50,000 3-year 3-year THB Million 20,000 40,000 60,000 80,000 100,000 3-year 5-year THB Million 10,000 20,000 30,000 40,000 50,000 3-year 3-year 7&10-year THB Million 10,000 20,000 30,000 40,000 50,000 3-year 10-year 3-year THB Million 20,000 40,000 60,000 80,000 100,000 3-year 3-year 6-year THB Million Tenor Coupon

Max. Size (THB million)

3-year Fixed 2,000 3-year Fixed 500 3-year Fixed 2,000 3-year Fixed 500 3-year Fixed 50,000

10,000 20,000 30,000 40,000 50,000 3-year 3-year 3-year 3-year 3-year THB Million

Tenor Coupon

Max. Size

(THB million)

3-year

Fixed 4,000

3-year

Fixed 4,000 Tenor Coupon

Max. Size

(THB million)

3-year

Fixed 3,000

3-year

Fixed 5,000

6-year

Fixed 80,000 Tenor Coupon

Max. Size

(THB million)

3-year

Fixed 4,000

3-year

Fixed 4,000

7&10-year

Fixed 30,000 Tenor Coupon

Max. Size

(THB million)

3-year

Fixed 4,000

10-year

Fixed 50,000

3-year

Fixed 4,000 Tenor Coupon

Max. Size

(THB million)

3-year

Fixed 50,000

5&10-year

Step-up 20,000 Tenor Coupon

Max. Size

(THB million)

3-year

Fixed 500

6-year

Step-up 100,000

2

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SLIDE 4

Domestic Bond Market Has Developed Rapidly and Efficiently

Government has more options to borrow money
Benchmark Bonds and other innovation bonds

have lower borrowing cost than Savings Bond

0% 20% 40% 60% 80% 100% 120%

2 4 6 8 10 12 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun- 16 Asian Financial Crisis

75%

THB Trillion % of GDP

Post Crisis – 2000 :

Volume Oriented  Bond Market Capitalization Tripled  Government Bonds Outstanding grew by 50 times  Government Bond Market Share jumped from 3% in 1997 to 44% in 2000

2007 - 2009:

Development Oriented  Regular Benchmark Issuance  New Product Development  Regular Market Dialogue with BOT and PD

Pre-Crisis

Illiquid Bond Market
Absence of Benchmark Bond
Dominated by SoE’s Bonds

2010 - 2012:

(Market Deepening Oriented)  50-yr Bond, 10-yr LB, ScriplessRetail Savings Bond  Upgrade PD Privileges  8 Benchmark Bonds create reliable reference yield curve

Next Step 2013 - 2016:

(Financing Thailand & Connecting ASEAN)  25-yr Amortized Bond, 15-yr ILB  Bond Switching & Bond Consolidation  Regional Linkage (CGIF)  Foreign Currency Bond

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SLIDE 5

Innovation Bond

60%

10% 10% 10% 10% 5

Development and Globalization

Savings bond

Investors’ options
Asset Allocation
Investment Knowledge
Growing of alternative

investment in the market

Derivative
Commodity
Mutual Fund (LTF, RTF)
Real Estate
Arts & Antique
Etc.

80 180

Single House Town house Condominium Land

House Price Index – Bank of Thailand

2008 2010 2012 2014 2016 1,200 1,300 1,400 1,500 1,600 1,700

SET Index

2013 2014 2015 2016

Gold Price – goldprice.org

1.5 2.5 3.5 4.5

Government Bond Average Yield

% p.a.

2011 2012 2015 2016 2014 2013

More Competitors

Real Estate Gold Investment Stock Investment

Government Funding Tools
Benchmark Bond
Savings Bond
Inflation-Linked Bond
Amortized Bond
Bank Loan
Treasury Bills
Promissory Note

Major government funding instrument is Benchmark Bonds Comprising of 7 series such as 5-10-15-20-30-50 year

Savings Bonds tenor 3 – 10 year

Bank Loan tenor 2-4 year

Other

T-bill tenor 3 day – 1 year
Promissory Note tenor 4 – 45 year

4 3 2 5

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SLIDE 6

Before the Crisis

Illiquid bond market and unreliable yield curve
Main instrument for government fundraising

After the Crisis

Bond Market Capitalization had raised
New funding tools have been developed
High-Cost : needs 80 – 120 bps over the government bond yield to prefer the retail investors
Demand of the investors : main investors in government bond are institutional investors
Lower relatively Return compared to other investment : Equity, Commodity, Real Estate and etc.

Savings Bond Vs. Other Government Funding Tools Current Savings Bond Position

Supporting the Government Policy: Savings Society
For Retail Investors especially Elderly : Risk Free Investment
Maintain the proportion for government funding in the future :

Limited time period & Large amount

Summary : Savings Bond as Government Funding Instrument

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SLIDE 7

Thai Government Savings Bond Distribution Channels

Over the Bank branches’ counter (The original distribution channel)

= 99.4%

*the percentages are according to the result of the latest savings bond

Automatic Teller Machine: ATM (Since FY2011) Internet Banking (The Latest channel – FY2016)

= 0.3% = 0.3%

Favorite Customers
Familiar to Retired and Older people
More than 40,000 terminals
24 hours service
Fast and convenient
Lifestyle of the new generation

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SLIDE 8

Widening Deepening Diagonal Future : What are we planning to make it happen?

Extending the selling period
Increasing the number of the distribution

channels

Expanding the Retail Investor Base:

the Non-Profit Entities and Working-Age

Expanding the bond type regarding the

investors’ preferences

The whole system development

e.g. Treasury Direct

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SLIDE 9

Appendix

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SLIDE 10

By Bills By Instruments

957,xxx MB FY 2017

Tentative-

GOVT Fund Raising Plan

Loan Bond

5-10-15-20-30-50 yrs

550,xxx

Promissory Notes R-Bill, And Others

Remark :

1. Exclude external funding for both new borrowing and rollover debt with amount of 71,xxx
2. Exclude T-Bill rollover debt

New Borrowing

440,XXX MB Roll Over 517,XXX MB

Rollover FIDF Debt 313,xxx Rollover Govt Debt 189,xxx

Rollover SOEs Debt 15,xxx

Deficit 390,xxx

On-Lending 50,xxx

Insurance Decree 5x

Savings Bond

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SLIDE 11

Historical Changes in Thai Government Bonds Issuance by Bond Types

47,000 46,000 98,850 96,000 51,605 11,000 259,826 215,000 221,110 223,850 202,000 266,139 274,999 134,000 148,900 136,641 152,861 151,471 140,733 269,862 40,000 50,872 65,000 22,730 29,338 54,000 61,000 89,379 7,000 82,234 3,814 31,577 7,367 38,000 20,141 69,073

100,000 200,000 300,000 400,000 500,000 600,000 700,000 2010 2011 2012 2013 2014 2015 2016 Saving Bonds Amortizing Bonds Inflation-Linked Long-term (>10 yr) Medium-term (5-10 yr) Short-term (<5 yr)

* Included Debt Switching THB Mil. 11

SLIDE 12

The Latest

Regular Savings Bond Issuance

What different :

The Non-Profit Entities

can not purchase this latest savings bond

Why? :

To be an exclusive

investment for Retail Investors

High funding cost
Not in the period of

government funding needs

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SLIDE 13

2011 2012 2013 2014 2015 2016 2017

2560 2017

2020 2021 2022 2023 2024 2025 2026

5. SB189A

31,577 MB

1. SB16DA

4,000 MB

2. SB175A

2018 2019

4,000 MB

7. SBST215A
9. SB247A

A

11,836 MB 18,164 MB

B E C

3. SB17DA

4,000 MB

FY2017 Expiration of 2 SB 8,000 THB Mil. (5%) FY2018 Expiration of 3 SB 39,577 THB Mil. (26%) FY2019 Expiration of 1 SB 50,000 THB Mil. (32%) FY2021 Expiration of 2 SB 21,206 THB Mil. (14%) FY2024 Expiration of 1 SB 18,164 THB Mil. (12%) FY2025 Expiration of 1 SB 12,141 THB Mil. (8%) FY2026 Expiration of 1 SB 5,840 THB Mil. (4%)

A C F B E G

10. SBST251A

12,142 MB

G

Savings Bond Outstanding

As of September 30th, 2016

158,791 MB

(11 Series)

4. SB185A

4,000 MB

6. SB18OA

50,000 MB

D D

8. SB217A
11. SBST265A

11,702 MB 7,370 MB

F

Savings Bond : Safe Haven for Retail Investors

2018 2017 2019 2026 2025 2024

The Last SB will be expired in next 10 years (FY2026)

2021

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SLIDE 14

Inaugural 10-yr Inflation-Linked Bond (10-yr) Long-term Fixed Promissory Notes (25-35-45-yr) Electronic Retail Savings Bond (3-5-yr) Saving Bond Online Super- Size Inaugural 25-yr Back-End Amortized Bond

Domestic Bond Market in Transition

Bu Buil ilding Yi Yiel eld Cur urve / En Enhancin ing Li Liquidity ty

Re Regi giona nal Con Conne necti tivity / AE AEC

Market t Infrastructure Inn Innovatio ion / Pro Product t Development Deb ebt t Fol Folio En Enhancement Sus Sustainable Sou Source of

f Fu

Fund

Activated Public Debt Management Fund Appointed 14 MOF-Outright PD Strengthening PD system

(Exclusivity, League Table, Greenshoes Option)

Bond Switching (1st execution: 28 Nov 14) Baht Bond (Foreign Issuers Bond) ATM Lengthened Thai Khem Khang (350,000 THB Mil.) 1,900,000 THB Mil. Long-Term Infrastructure Inv’t Water Decree (350,000 THB Mil.) Well-Distributed Maturity Profile / Bond Switching Well-Balanced Fixed-Floating Ratio Cost Lowered FIDF Decree Passed = 70,000 THB Mil. Fiscal Space

Market Deepening Oriented (2010 - 2012) Funding Infrastructure Investment Connecting ASEAN (2013 - 2016)

Well-Distributed Investor Base

 Funding Infrastructure Investment  Connecting ASEAN

8 Tenors of Benchmark Bonds

3 5 7 10 15 20 30 50 10 15 20 30 50

150,000 MB Liquidity-Oriented

Outstanding Amount

3 5 7

300,000 MB

Full Funding Capacity : 1,200,000 THB Mil.

Ma Market t Con

nsultatio

ion

Annual PDMO Market Dialogue Quarterly PDMO one-on-one PD Dialogue STRIPS Bond Baht Bond (CLMV) Foreign Currency Bond (Plan) Credit Guarantee Investment Facility (CGIF)

2016 Highlights Quarterly PDMO one-on-group MOF Outright PD Dialogue

Annual PDMO Market Dialogue

Monthly PDMO one-on-one MOF Outright PD Dialogue

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SLIDE 15

Savings Bond as A Tool for Savings Society

Expand the investor base

34,316 38,000 50,000

10,000

20,000 30,000 40,000 50,000 60,000 FY2012 FY2014 FY2016

Increasing of Savings Bond Sales

THB mil.

9,894 27,771 34,049

10,000

20,000 30,000 40,000 50,000

FY2012 FY2014 FY2016

Increasing Number of Individual Investors

182 194 293

100

200 300 400 500

FY2012 FY2014 FY2016

Increasing Number of the Non-Profit Entity Investors

No. of Customers
No. of Customers
The Direct Investment from

the retail investors increased

Number of Individual and the

Non-Profit Entity investors increased

15

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16

Savings Bond as A Tool for Savings Society

Expand the investors base

77 289 274 302 1,114

31 90 87 95 293

500 1,000 1,500 FY2012 FY2013 FY2014 FY2015 FY2016 THB mi mil. l.

Purchasing amount

No. of the non-profit entities

1,321 2,777 2,973 3,070 15,250

10,000 20,000 FY2012 FY2013 FY2014 FY2015 FY2016 No

No. of Custo

tome mers rs

2,670 6,129 6,901 6,938

34,343

10,000 20,000 30,000 40,000 FY2012 FY2013 FY2014 FY2015 FY2016 No

No. of Custo

tome mers rs Number of savings bond customers

Number of customers who 60 years old and above

Number and purchasing amount of the non-profit entities

FY2016 issued: THB 50,000 mil.

Direct investment increased

395% from FY2015

(27,405 accounts)

The Elderly are the main customers

f Savings Bond as

More than 40% of Total Customers

49% 45% 43% 44% 46% The number and purchasing amount of

the Non-Profit Entities

in savings bond has continuously

increased

*Excluded the Special Savings Bonds

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SLIDE 20

Domestic Bond Market Has Developed Rapidly and Efficiently

Savings Bond objective is the instrument for retail investors
Savings Bond coupon needs to top-up 80 to 120 bps
ver the government bond yield
Maintain Savings Bond for the future urgent funding needs

0% 20% 40% 60% 80% 100% 120%

2 4 6 8 10 12 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun- 16 Asian Financial Crisis

75%

THB Trillion % of GDP

Post Crisis – 2000 :

Volume Oriented  Bond Market Capitalization Tripled  Government Bonds Outstanding grew by 50 times  Government Bond Market Share jumped from 3% in 1997 to 44% in 2000

2007 - 2009:

Development Oriented  Regular Benchmark Issuance  New Product Development  Regular Market Dialogue with BOT and PD

Pre-Crisis

Illiquid Bond Market
Absence of Benchmark Bond
Dominated by SoE’s Bonds

2010 - 2012:

(Market Deepening Oriented)  50-yr Bond, 10-yr LB, ScriplessRetail Savings Bond  Upgrade PD Privileges  8 Benchmark Bonds create reliable reference yield curve

Next Step 2013 - 2016:

(Financing Thailand & Connecting ASEAN)  25-yr Amortized Bond, 15-yr ILB  Bond Switching & Bond Consolidation  Regional Linkage (CGIF)  Foreign Currency Bond

21

SLIDE 21

500,000 1,000,000 1,500,000 2,000,000 0% 35%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2021 2024 2025 2026

Proportion of Household and Non-profit in Government Debt Securities

Structure Shift … Savings Bond was a Main Instrument

for Government funding under the economic crisis

MB

4%

Savings Bond Outstanding

% of Investors in Government Debt Securities

150,791 MB

0-

Savings Bond outstanding in Thai bond market

158,791 MB

(at the end of September 2016)

Government Debt Securities

(Classified by Types of Investors)

Today

29% 4%

25,000 MB 366,490 MB 424,311 MB 381,796 MB 483,839 MB

61,214 MB 19,511 MB Contractual Funds 27% Insurance Company 28%

NR 13%

Depository Corporation 14% Financial Institution 3%

Bot 6%

Mutual Funds 2%

Other 1%

22

SLIDE 22

Domestic Bond Market Has Developed Rapidly and Efficiently

Savings Bond is No Longer

Government’s primary fundraising instruments

0% 20% 40% 60% 80% 100% 120%

2 4 6 8 10 12 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun-16 Asian Financial Crisis

75%

THB Trillion % of GDP

Post Crisis – 2000 :

Volume Oriented

 Bond Market Capitalization Tripled  Government Bonds Outstanding grew by 50 times  Government Bond Market Share jumped from 3% in 1997 to 44% in 2000

2007 - 2009:

Development Oriented  Regular Benchmark Issuance  New Product Development  Regular Market Dialogue with BOT and PD

Pre-Crisis

Illiquid Bond Market
Absence of Benchmark Bond
Dominated by SoE’s Bonds

2010 - 2012:

(Market Deepening Oriented)  50-yr Bond, 10-yr LB, ScriplessRetail Savings Bond  Upgrade PD Privileges  8 Benchmark Bonds create reliable reference yield curve

Next Step 2013 - 2016:

(Financing Thailand & Connecting ASEAN)  25-yr Amortized Bond, 15-yr ILB  Bond Switching & Bond Consolidation  Regional Linkage (CGIF)  Foreign Currency Bond

23

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24

Development and Globalization

Savings bond Stock Investment Gold Investment Real Estate

Investment options
Asset Allocation
Investment Knowledge
Growing of alternative

investment in the market

Derivative
Commodity
Mutual Fund (LTF, RTF)
Real Estate
Arts & Antique
Etc.

80 100 120 140 160 180 Single House Town house Condominium Land

House Price Index – Bank of Thailand

2008 2010 2012 2014 2016 1,200 1,300 1,400 1,500 1,600 1,700

SET Index

2013 2014 2015 2016

Gold Price – goldprice.org

1.5 2.0 2.5 3.0 3.5 4.0 4.5

Government Bond Average Yield

% p.a.

2011 2012 2015 2016 2014 2013

More Competitors

SLIDE 24

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