The launch of an unrated Laotian government bond on Thailand’s bond market could pave the way for Cambodia to issue its own government bond denominated in Thai baht.

The Bangkok Post reported yesterday that Thailand’s Finance Ministry and Public Debt Management Office had allowed Cambodia, Vietnam and Myanmar to follow in the steps of Laos and raise capital through the issue of their own sovereign bonds on Thailand’s financial market.

Grant Knuckey, chief executive officer of ANZ Royal Bank, told the Post yesterday by email that the Thai framework opened up the opportunity for Cambodia to permit small debt issues to a willing high-yield investor community.

“It could possibly serve as a ‘training ground’ for Cambodia to prepare for a larger international US dollar debt issuance in say, one to two years time,” he said.

The Laotian government became the first country in the region to raise capital in Thailand through a bond sale, with the issue of 1.5 billion baht ($50 million), three-year bonds in May last year. The notes were priced at a yield of 4.5 per cent. Two more subsequent installments of 3 billion baht and 4.5 billion baht have since been issued.

Adisorn Singhsacha, managing director of Twin Pine Consulting Co, a financial adviser on the Laos bond sale, told the Bangkok Post that the Laotian government planned more bond issues in the future to raise capital for energy and infrastructure projects.

His company was also working with the Myanmar and Cambodian governments on possible baht denominated bonds, Singhsacha added.

Singhsacha said that the cost of raising funds in Thailand was greater than borrowing from international institutions, but that a bond issue did not come with a lot of the ties applied to foreign lending.

Svay Hay, president and CEO of ACLEDA Securities, said that the offer of unrated bonds, or a bond that has not had its creditworthiness assessed by an international credit rating agency, provides the Cambodian government with another tool to raise capital.

“The government and corporations can mobilise funds from the public investors to support project and growth, and the securities sector will be more active and attract more investors both local and overseas,” Hay said.

“Sufficient sources of funds would fulfill shortages in the budget for expenditure and there will be a change in debt scenarios with [the Cambodian government being] less dependent on partners

or lenders.”

In principle, debt securities are rated to give investors trust in the issuer, but in the instance of an unrated security, investors would rely solely on trusting the country that issues the bond, Hay added.