The government plans to make the Thai capital market a Southeast Asian funding hub after the Laotian government became the first regional foreign country to raise capital in Thailand.
The Finance Ministry and its Public Debt Management Office (PDMO) have allowed Cambodia, Laos, Myanmar and Vietnam to issue unrated bonds in Thailand's financial market.
The Laotian government last year began issuing 9 billion baht in government bonds. Its state-owned power company also plans to issue corporate bonds worth 6-8 billion baht soon.
Laos launched the first part of its sovereign baht-denominated bonds last year worth 1.5 billion baht, with the second instalment worth 3 billion and the third worth 4.5 billion.
The third tranche has a greenshoe option that could see sales reach 5 billion baht.
This option allows underwriters to sell investors more shares than originally planned.
Adisorn Singhsacha, managing director of Twin Pine Consulting Co, financial adviser for the bond sale, said the Laotian government planned similar issues worth many billions of baht to raise funds for energy and infrastructure projects.
Demand for the bonds is high, particularly among institutional investors, due to their attractive return on investment, he said.
Even though the bonds are unrated, the Laotian Finance Ministry guarantees the investment, instilling confidence in investors.
The Thai government introduced this policy to boost the capital market as a regional funding hub, Mr Adisorn said.
The move will also support governments of neighbouring countries to raise funds from the Thai bond market without a rating.
It also supports foreign firms raising capital, but a credit rating is required. Such companies are also allowed to list on the Thai stock exchange.
Twin Pine Consulting is also adviser for a corporate bond issue by EDL-Generation Plc, the Laotian state-owned hydroelectric power company.
The 10-year corporate bonds, with an expected return of 5.5%, are expected to raise 6-8 billion baht.
That return is well above Thai government bond returns of about 2%.
The EDL issue has received a credit rating of BBB+ from Tris Rating.
"EDL is one of the best-quality assets among Laotian state enterprises. It has high potential from several future electricity investment projects with expected total capacity of 23,000 to 24,000 megawatts by 2020," Mr Adisorn said.
"In addition, it is likely to raise more funds in the Thai bond market and plans to list on the Thai bourse as its secondary market."
He said Twin Pine Consulting was working with the Myanmar and Cambodia governments on possible sovereign baht bond issues.
Several deals for corporate bond issues from private companies in South and Southeast Asia are also in the pipeline.
Mr Adisorn admitted the cost of raising funds in Thailand was higher than borrowing from international institutions but said a major advantage was it did not entail other obligations.
Malaysia has also opened its financial market by allowing neighbouring countries to raise funds there.
PDMO director-general Kritsda Udyanin said his office had not yet concluded details about a maximum amount for international issuers to issue baht-denominated bonds in Thailand.
Since 2004, baht bond issues have been valued at only 86.2 billion baht or just 1% of total bonds issued by the PDMO.
About 70% of baht bonds issued in Thailand have come from foreign financial institutions in South Korea and neighbouring countries, particularly Laos.