* Foreign investors bought $1.3 bln of Thai bonds in Q3
* Policy rate at record low 0.50%, further easing limited
* Bonds may lack catalysts to lure investors - analyst
BANGKOK, Oct 8 (Reuters) - Foreign investors are likely to continue buying Thai bonds in the final quarter of 2020 because of relatively higher returns and the country’s strong foreign reserves and fiscal position, an industry body said on Thursday.
Thailand’s successful coronavirus controls and positive interest rates have also helped attract capital inflows, Tada Phutthitada, president of the Thai Bond Market Association (TBMA), told a news conference.
Thailand has recorded only 3,622 coronavirus infections, with no local transmissions for weeks.
“We started to see fund inflows in the third quarter. As excess global liquidity remains ample and Thailand still looks good, usually money should come in,” he said.
Ten-year Thai bonds yielded 1.365% on Thursday while 10-year U.S. treasury yielded 0.7752%.
Foreign investors bought 39.4 billion baht ($1.3 billion) of Thai bonds in the third quarter after dumping about 111 billion baht worth in the first half of 2020, according to data the association released. Last year, they sold 134 billion baht worth of bonds.
However, risk factors such as presidential election in the United States and China’s inclusion in the FTSE Russell global bond index will reduce investors’ weightings on Thai bonds, Tada said.
Besides the Chinese factor, Thailand’s central bank may have reached the limits of its aggressive easing while the country still lacks foreign tourists, said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
“Thai bonds could be lacking positive catalysts to lure investors back,” said Kobsidthi.
Thailand’s policy interest rate, now at a record low of 0.50%, should remain low for some time and may not rise until there is a vaccine and a clear recovery in the Thai and global economies, the TBMA’s Tada said.
Thailand, Southeast Asia’s second-largest economy, may see its economy contract by a record 7.8% this year before growing 3.6% in 2021, the central bank has forecast. ($1 = 31.18 baht) (Reporting by Satawasin Staporncharnchai and Orathai Sriring; Editing by Christian Schmollinger)
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