THAILAND yesterday introduced measures including a liquidity support fund of 70 to 100 billion baht to stabilise the financial market and stop liquidity amid the Covid-19 outbreak that has led to turbulence in financial markets and sales of assets.
The Thai Bankers’ Association, the Government Savings Bank, Thai insurance providers and the Government Pension Fund have set up a 70 to 100 billion baht Corporate Bond Stabilisation Fund.
A joint statement by the Bank of Thailand (BoT), the Finance Ministry and the Securities and Exchange Commission said the fund will invest in high-quality, newly issued bonds by corporates that cannot fully roll over maturing corporate bonds.
“BoT will continue to provide liquidity to the government bond market through bond purchasing to ensure that the government bond market continues to function normally.
“‘These measures are expected to provide liquidity and help the normal functioning of the financial market and help build investors’ confidence.
“Relevant public and private institutions will continue to work together, monitor the situation and provide additional measures to ensure the normal and efficient functioning of the financial market,” it said.
The statement said the BoT has set up a special facility to provide liquidity for mutual funds through commercial banks.
It said commercial banks who purchase investment units of high-quality money market funds or daily fixed income funds that have been impacted by the decreased market liquidity will be able to use the underlying unit trust as collateral for liquidity support from this special facility.
“The facility will remain open until the market condition returns to normal. BoT’s preliminary estimate of eligible bond mutual funds is approximately one trillion baht,” it said.
The statement said as the current stress period is the result of the temporary liquidity shortage while bond mutual funds still hold low-risk, good quality assets, the public are urged not to rush to redeem during this period of market abnormality.
“Doing so might result in prices that are significantly below fair value,” it said.
On Friday, Thailand slashed the policy rate by 25 basis points to a fresh record low of 0.75%.
Today, Thailand reported a record-high 188 new Covid-19 cases to take its total to 599, with one fatality. – March 23, 2020, Bernama
