THAILAND

Mr. Suwit RojanavanichGeneral 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

1

0

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

% o

f In

vest

ors

in G

ove

rnm

ent

Deb

t Se

curi

ties

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 MB381,796 MB

483,839 MB

61,214 MB19,511 MB

Contractual Funds27%

Insurance Company

28%NR

13%

Depository Corporation

14%

Financial Institution

3%

Bot6%

Mutual Funds

2%

Other1%

Before and during the CrisisSavings 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 over the government bond yield

- Maintain Savings Bond for the future urgent funding needs

1

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

0

2,000

4,000

6,000

8,000

10,000

Tenor : 3-year

0

2,000

4,000

6,000

8,000

10,000

Issuance : Twelve times(Every month)

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

Tenor : 3-year Tenor : 5-year

Coupon : Fixed Coupon : Fixed Coupon Type : Step-up

0

20,000

40,000

60,000

80,000

100,000

5-year

THB Million THB Million THB Million

0

10,000

20,000

30,000

40,000

50,000

3-year 5&10-year

THB Million

0

10,000

20,000

30,000

40,000

50,000

3-year 3-year

THB Million

0

20,000

40,000

60,000

80,000

100,000

3-year 5-year

THB Million

0

10,000

20,000

30,000

40,000

50,000

3-year 3-year 7&10-year

THB Million

0

10,000

20,000

30,000

40,000

50,000

3-year 10-year 3-year

THB Million

0

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

0

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

23

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%

0

2

4

6

8

10

12

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Jun

-1

6

Asian Financial Crisis

75%

THB

Tri

llio

n

% o

f G

DP

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

34

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

180Single House Town houseCondominium Land

House Price Index – Bank of Thailand

2008 2010 2012 2014 2016

1,2001,3001,4001,5001,6001,700 SET Index

2013 2014 2015 2016

Gold Price – goldprice.org

1.5

2.5

3.5

4.5Government Bond Average Yield% p.a.

2011 2012 2015 201620142013

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

1

4

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

5

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

6

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

7

Appendix

9

By Bills By Instruments

957,xxx MBFY 2017

-Tentative-

GOVT Fund Raising Plan

Loan Bond5-10-15-20-30-50 yrs

550,xxx

Promissory NotesR-Bill, And Others

Remark : 1. Exclude external funding for both new borrowing and rollover debt with amount of 71,xxx2. Exclude T-Bill rollover debt

New

Bo

rro

win

g

44

0,X

XX

MB

R

oll

Ove

r5

17

,XX

X M

B

RolloverFIDF Debt

313,xxx

Rollover Govt Debt

189,xxx

Rollover SOEs Debt 15,xxx

Deficit 390,xxx

On-Lending 50,xxxInsurance Decree 5x

Savings Bond

10

Historical Changes in Thai Government Bonds Issuance by Bond Types

47,000 46,000

98,850 96,00051,605

11,000

259,826215,000

221,110 223,850

202,000

266,139

274,999

134,000

148,900

136,641 152,861

151,471

140,733

269,86240,000

50,87265,000

22,730

29,338

54,000

61,000

89,379

7,000

82,2343,814

31,577

7,367

38,000

20,141 69,073

0

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 (

The LatestRegular 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

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. SB17DA4,000 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 OutstandingAs of September 30th, 2016

158,791 MB (11 Series)

4. SB185A4,000 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

20182017 2019 202620252024

The Last SB will be expiredin next 10 years

(FY2026)

2021

13

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

Building Yield Curve /Enhancing Liquidity

Regional Connectivity / AEC

Market Infrastructure

Innovation /Product Development

Debt FolioEnhancement

SustainableSource of Fund

Activated Public Debt Management Fund

Appointed 14 MOF-Outright PDStrengthening 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 ofBenchmark Bonds

3

57

1015

2030

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.

Market ConsultationAnnual 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

14

Savings Bond as A Tool for Savings Society Expand the investor base

34,31638,000

50,000

-

10,000

20,000

30,000

40,000

50,000

60,000

FY2012 FY2014 FY2016

Increasing of Savings Bond SalesTHB 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 InvestorsNo. of Customers No. of Customers

• The Direct Investment from

the retail investors increased

• Number of Individual and the Non-Profit Entity investors increased

15

16

Savings Bond as A Tool for Savings Society Expand the investors base

77 289 274 302

1,114

31 90 87 95293

0

500

1,000

1,500

FY2012 FY2013 FY2014 FY2015 FY2016

THB mil.

Purchasing amount No. of the non-profit entities

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

15,250

0

10,000

20,000

FY2012 FY2013 FY2014 FY2015 FY2016

No. of Customers

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

34,343

0

10,000

20,000

30,000

40,000

FY2012 FY2013 FY2014 FY2015 FY2016

No. of Customers

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 of 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

18

19

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 over the government bond yield

- Maintain Savings Bond for the future urgent funding needs

0%

20%

40%

60%

80%

100%

120%

0

2

4

6

8

10

12

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Jun

-1

6

Asian Financial Crisis

75%

THB

Tri

llio

n

% o

f G

DP

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

0

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 Instrumentfor Government funding under the economic crisis

MB

4%Savings Bond Outstanding

% o

f In

vest

ors

in G

ove

rnm

ent

Deb

t Se

curi

ties

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 MB381,796 MB

483,839 MB

61,214 MB19,511 MB

Contractual Funds27%

Insurance Company

28%NR

13%

Depository Corporation

14%

Financial Institution

3%

Bot6%

Mutual Funds

2%

Other1%

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%

0

2

4

6

8

10

12

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Jun

-16

Asian Financial Crisis

75%

THB

Tri

llio

n

% o

f G

DP

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

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

180Single 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

1.52.02.53.03.54.04.5

Government Bond Average Yield% p.a.

2011 2012 2015 201620142013

More Competitors

25