Kasikornbank (KBank) has advised corporate clients to tap short-term borrowing with a maturity of less than one year amid high volatility in global financial markets.
Short maturities from both bank loans with floating interest rates and corporate bonds are the preferred borrowing option given the uncertain circumstances of the moment.
From May to June, the yield on the 10-year government bond has risen significantly, even as six-month and one-year yields have remained flat, said executive vice-president Vasin Vanichvoranun.
"On average, yields of short-term bonds are lower than long-term yields by 50-100 basis points," he said. "So short-term borrowing is a good choice while borrowers take a wait-and-see approach."
Prime lending rates in the commercial banking industry have also been kept on hold despite last month's 25-basis-point cut in the policy rate to 2.50%.
The minimum lending rate of big local banks is 7%.
Global economic uncertainty, fuelled by the Fed's mixed signals and China's economic slowdown, has pushed up financial costs for local businesses, leading them to delay outbound investment decisions.
Foreign direct investment (FDI), though, remains positive due to the country's strong fundamentals.
Year to date, Thailand's FDI includes 530 projects worth a collective 256 billion baht, led by Japanese investors.
FDI in Thailand by Chinese investors is insignificant, so its policy of slowing credit growth will not have much impact on the Thai economy.
"More caution is needed for local exporters who ship products to China," said Mr Vasin.
KBank's loans related to China exports come to 45 billion baht or 5% of total corporate outstanding loans worth 413 billion baht.
About the author
- Writer: Somruedi Banchongduang
Position: Business Reporter