US rating agencies are unlikely to upgrade Thailand's sovereign credit risk to an investment grade until 2000, the global head of sovereign-risk research at Salomon Smith Barney said.

Stephen Taran, a veteran in the emerging bond market, explained that Moody's Investors Service and Standard and Poor's would like to see further progress in Thailand's external account, bank and corporate restructuring and implementation of economic laws before they decided to upgrade the country's sovereign-risk rating.

However, he said Thailand had made significant progress in achieving external-account stability given the current-account surplus and the comfortable level of foreign-exchange reserves.

On bank recapitalisation and restructuring, Taran said that the rating agencies believed that more work still needed to be done, particularly where large banks were concerned.

The rating agencies, he said, are also keeping a watch on how the economic laws, narrowly passed earlier this year to put in place the framework for financial and corporate restructuring, will be implemented and whether they will lead to timely settlement of corporate debts.

''Thailand's prospects have greatly improved by the principles of bank and corporate restructuring,'' he added.

Finance Minister Tarrin Nimmanahaeminda met the rating officials in New York in April, after which the rating agencies raised Thailand's outlook from negative to positive or from negative to stable.

Fitch IBCA, a UK-based rating agency, also met Tarrin and may move to upgrade Thailand's rating before agencies in the US do so, according to market sources.

During his presentation on the Asia-Pacific Sovereign Credit Luncheon Series, Taran focused his address on the prospect of the Asia's sovereign-credit profiles, taking a broad view that Asian economies had stabilised and recovery was on track.

As far as Thailand is concerned, he said, the country may not need to do a global bond offering now, given the ample liquidity in the domestic market that the government can tap, and the Kingdom of Thailand bond, if launched, is likely to carry a spread of 253 basis points above US Treasury's or pay a higher premium than the Korean bonds.

Thai and other Asian sovereign bonds have regained their appetite compared to the past two years, when at one point their spreads skyrocketed to 900 basis points. The $600-million Thai sovereign bond is now traded at about 215 basis points compared to 222 and 225 for Korean bonds. This is largely because the Thai bond is not liquid or locked up by asset swaps.

But Taran said that if a new issue of the Kingdom of Thailand was to be launched it would pay a higher premium than the Korean bonds or carry a spread of about 253 basis points. Malaysia recently issued $1 billion worth of bonds and paid a premium of about 300 basis points. Taran declined to comment on the Malaysian issue, citing US regulations prohibiting those involved in the syndication of the bonds from making public comments within 40 days.

However, launching a global bond to gain access to the global bond market is one way to demonstrate investors' confidence. Taran said access to the bond markets fed the virtuous circle of capital inflow, currency stability, lower domestic interest rates, economic recovery and access to foreign capital.

He added that Thailand might not need additional external borrowing now, but things might change in the event of the Dow Jones sell-off, US consumers' loss of confidence and a retreat of foreign capital from the region. If this happens, the global bonds will be needed to offset the capital outflow and the ''retreat'' in foreign bank lending.

BY THANONG KHANTHONG