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

THAILAND Savings Bond : Developing for the Future To be the Safe Haven for our Retail Investors Mr. Suwit Rojanavanich General Director of Public Debt Management Office Ministry of Finance, Kingdom of Thailand 1

After the Crisis Before and during the Crisis - Savings Bond objective is the instrument for retail investors - Savings Bond coupon needs to top-up 80 to 120 bps Savings Bond was the main over the government bond yield instrument for government funding - Maintain Savings Bond for the future urgent funding needs MB 35% 2,000,000 Savings Bond Outstanding 4 % Government Debt Securities Mutual Other (Classified by Types of Investors) Funds 1% 2% 29 % Proportion of Household and Non-profit Financial % of Investors in Government Debt Securities Bot Contractual Institution in Government Debt Securities 6% Funds 3% 27% 1,500,000 Depository Corporation 14% Insurance NR Company 28% 13% 1,000,000 483,839 MB 500,000 424,311 MB Today 381,796 MB 366,490 MB 4 % Savings Bond outstanding 150,791 MB in Thai bond market 25,000 MB 158,791 MB 61,214 MB 19,511 MB (at the end of September 2016) -0- 0% 0 1 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

Changes of Savings Bond Issuance in the Last 10 years FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Issuance : Twelve times Issuance : Twelve times Issuance : One time Issuance : Two times Issuance : Five times (Every month) (Every month) Max. Size Tenor Coupon Max. Size (THB million) Tenor Coupon (THB million) 3-year Fixed 2,000 Tenor : 3-year Tenor : 3-year Tenor : 5-year 3-year Fixed 500 3-year Fixed 500 Coupon : Fixed Coupon : Fixed Coupon Type : Step-up 3-year Fixed 2,000 Step-up 100,000 6-year Max. Size : THB 500 million Max. Size : THB 500 million Max. Size : THB 80,000 million 3-year Fixed 500 3-year Fixed 50,000 THB Million THB Million THB Million THB Million THB Million 10,000 10,000 100,000 100,000 50,000 8,000 8,000 80,000 80,000 40,000 6,000 6,000 60,000 30,000 60,000 4,000 4,000 20,000 40,000 40,000 2,000 2,000 20,000 10,000 20,000 0 0 0 0 0 3-year 3-year 3-year 3-year 3-year 5-year 3-year 5-year FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Issuance : Three times Issuance : Two times Issuance : Three times Issuance : Three times Issuance : Two times Max. Size Max. Size Max. Size Max. Size Max. Size Tenor Coupon Tenor Coupon Tenor Coupon Tenor Coupon Tenor Coupon (THB million) (THB million) (THB million) (THB million) (THB million) Fixed 4,000 Fixed 4,000 3-year Fixed 3,000 3-year 3-year Fixed 50,000 3-year 3-year Fixed 4,000 Fixed 5,000 Fixed 4,000 Fixed 50,000 3-year 3-year 10-year Step-up 20,000 5&10-year 3-year Fixed 4,000 6-year Fixed 80,000 Fixed 30,000 3-year Fixed 4,000 7&10-year THB Million THB Million THB Million THB Million THB Million 100,000 50,000 50,000 50,000 50,000 80,000 40,000 40,000 40,000 40,000 60,000 30,000 30,000 30,000 30,000 40,000 20,000 20,000 20,000 20,000 10,000 10,000 20,000 10,000 10,000 3 0 0 0 0 0 2 3-year 3-year 3-year 3-year 7&10-year 3-year 10-year 3-year 3-year 3-year 6-year 3-year 5&10-year

Domestic Bond Market • Government has more options to borrow money • Has Developed Rapidly Benchmark Bonds and other innovation bonds have lower borrowing cost than Savings Bond and Efficiently 2007 - 2009: Next Step 2013 - 2016: 2010 - 2012: Development Oriented (Market Deepening Oriented) (Financing Thailand & Connecting ASEAN)  Regular Benchmark Issuance  50-yr Bond, 10-yr LB, ScriplessRetail Savings Bond  25-yr Amortized Bond, 15-yr ILB  Bond Switching & Bond Consolidation  Upgrade PD Privileges  New Product Development  Regional Linkage (CGIF)  8 Benchmark Bonds create  Regular Market Dialogue with BOT and PD  Foreign Currency Bond reliable reference yield curve 12 120% 10 100% Post Crisis – 2000 : Volume Oriented THB Trillion  Bond Market Capitalization Tripled % of GDP 8 80%  Government Bonds Outstanding grew by 50 times 75 %  Government Bond Market Share jumped from 3% in 1997 to 44% in 2000 6 60% Pre-Crisis - Illiquid Bond Market 4 40% - Absence of Benchmark Bond - Dominated by SoE’s Bonds 2 20% 0 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Jun- 16 4 3 Asian Financial Crisis

Development and Globalization More Competitors • Government Funding Tools 1 Major government funding instrument is Benchmark Bonds Comprising of 7 series such as 5-10-15-20-30-50 year • Benchmark Bond 10 % 2 Savings Bonds tenor 3 – 10 year • Savings Bond 10 % • Innovation Bond 3 Inflation-Linked Bond • Amortized Bond 10 % 60 % 4 Bank Loan tenor 2-4 year • Bank Loan 10 % • Treasury Bills 5 Other - T-bill tenor 3 day – 1 year • Promissory Note - Promissory Note tenor 4 – 45 year • Investors’ options Savings bond % p.a. Government Bond Average Yield 4.5 • 3.5 Asset Allocation 2.5 • Investment Knowledge 1.5 2011 2012 2013 2014 2015 2016 Stock Investment SET Index • Growing of alternative 1,700 1,600 1,500 investment in the market 1,400 1,300 • 1,200 Derivative 2013 2014 2015 2016 Gold Investment • Gold Price – goldprice.org Commodity • Mutual Fund (LTF, RTF) • Real Estate House Price Index – Bank of Thailand Real Estate • Arts & Antique 180 Single House Town house Condominium Land • Etc. 5 4 80 2012 2014 2016 2008 2010

Summary : Savings Bond as Government Funding Instrument Before • Illiquid bond market and unreliable yield curve • Main instrument for government fundraising the Crisis After • Bond Market Capitalization had raised • the Crisis New funding tools have been developed Savings Bond Vs. Other Government Funding Tools • 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. 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 5

Thai Government Savings Bond Distribution Channels Over the Bank branches’ counter (The original distribution channel) = 99.4 % - Favorite Customers - Familiar to Retired and Older people Automatic Teller Machine: ATM (Since FY2011) = 0.3 % - More than 40,000 terminals - 24 hours service Internet Banking (The Latest channel – FY2016) = 0.3 % - Fast and convenient - Lifestyle of the new generation 6 *the percentages are according to the result of the latest savings bond

Future : What are we planning to make it happen? • Extending the selling period • Increasing the number of the distribution Widening channels • Expanding the Retail Investor Base: the Non-Profit Entities and Working-Age • Expanding the bond type regarding the Deepening investors’ preferences • The whole system development Diagonal e.g. Treasury Direct 7

Appendix 9

FY 2017 GOVT Fund Raising Plan 957,xxx MB -Tentative- Insurance Decree 5x 50,xxx On-Lending Promissory Notes New Borrowing 440,XXX MB R-Bill, And Others 390,xxx Deficit Savings Bond 15,xxx Rollover SOEs Debt Rollover 189,xxx Govt Debt 517,XXX MB Loan Bond Roll Over 5-10-15-20-30-50 yrs 550,xxx Rollover 313,xxx FIDF Debt By Bills By Instruments 10 Remark : 1. Exclude external funding for both new borrowing and rollover debt with amount of 71,xxx 2. Exclude T-Bill rollover debt

Historical Changes in Thai Government Bonds Issuance by Bond Types Saving Bonds Amortizing Bonds Inflation-Linked * Included Debt Switching THB Mil. Long-term (>10 yr) Medium-term (5-10 yr) Short-term (<5 yr) 700,000 7,367 600,000 69,073 20,141 54,000 7,000 89,379 31,577 65,000 500,000 82,234 50,872 29,338 3,814 38,000 40,000 269,862 61,000 400,000 152,861 136,641 140,733 134,000 22,730 148,900 300,000 151,471 221,110 223,850 200,000 266,139 259,826 215,000 274,999 100,000 202,000 98,850 96,000 51,605 47,000 46,000 0 11,000 2010 2011 2012 2013 2014 2015 2016 11

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 12