The Ministry of Finance (MoF) has recently disclosed plans to coordinate with various ministries and sectors on introducing cohesive strategies during 2024 to stabilize and perfect Vietnam’s corporate bond market. This endeavor would involve refining the legal framework, strengthening infrastructure, and fostering a more sustainable investor base.

Vietnam’s economic landscape in 2024 brings with it a multitude of challenges. With several macro-economic indicators posing significant obstacles, there is a pressing need for State budget mobilization totaling VND655 trillion ($25.74 billion), with VND400 trillion ($15.72 billion) targeted to come through government bonds. The issuance of corporate bonds, meanwhile, hinges on the long-term capital requirements of businesses and demand among investors.

Seeking sustainable growth

Insights shared at the Conference on the Implementation of Bond Market Activities in 2024, held recently in Hanoi by the Hanoi Stock Exchange (HNX), underscored stakeholders’ interest in new products, investment rules, and bond trading regulations. This would encompass initiatives such as introducing government bond forward contracts, elevating investment thresholds for funds above 10 per cent, specifying audit requirements for credit institutions post-issuance, asset valuation methodologies on corporate bonds, and the selection of domestic and international credit rating agencies.

In response, regulatory bodies reaffirmed their commitment to managing, operating, and nurturing the bond market sustainably, securely, and robustly. The MoF pledged to collaborate with relevant ministries to enact cohesive measures aimed at stabilizing and advancing the corporate bond market, with a focus on refining legal frameworks, enhancing infrastructure, and cultivating a more resilient investor landscape.

It will also continue to bolster inspections, oversight, and the rectification of infractions by market entities. Attention is to be directed towards advancing the green bond market, issuing green government bonds, and exploring incentives for green corporate bonds, which would encompass fee structures, tax policies, technical support initiatives, and promotional endeavors for companies planning issuances.

Refined legal framework

According to data from HNX, capital raised in the government bond market through auctions at HNX totaled VND322.82 trillion ($12.68 billion) in 2023, a 39 per cent increase against 2022. The majority of issuances were concentrated on 10-year and 15-year tenures, which represented 82.7 per cent of the total. Bid-winning interest rates from the State Treasury last year exhibited a downwards trend, meeting objectives related to public debt restructuring and the sustainability of national financial security.

In the secondary market, the listing of government bonds had reached VND1,964.75 trillion ($77.27 billion) as of the end of 2023, a 16.5 per cent increase compared to 2022 and equivalent to 19.22 per cent of annual GDP. The value of listed government bonds has steadily risen over the past five years while the number of listed codes has declined. Value reached VND5,121 trillion ($201.2 billion) as of March 31, 2024, or more than double the figure in 2019.

The trading value of government bonds last year reached VND1,621.6 trillion ($63.6 billion), averaging VND6,513 trillion ($255.9 million) per session, down 15.37 per cent compared to 2022. Proprietary trading by commercial banks, which are the primary trading entities, predominantly engaged in outright transactions, maintaining an approximately 80 per cent share of total trading value. Proprietary trading of brokerage and securities firms collectively accounted for around 10 per cent each.

In contrast, the trading of individual corporate bonds has undergone centralized management through the operational trading system at HNX since July 19, 2023. Approximately 91.6 per cent of bond codes and 88.9 per cent of the bond value required for trading have been registered according to regulations. The average transaction value through the system has exceeded VND4 trillion ($156.99 million) per session.

Issuing entities have progressively met their disclosure obligations, striving to restructure debts, negotiate with creditors for bond swaps, extend debt maturities, and repurchase bonds before maturity. Consequently, the issuance of individual government bonds experienced a revival in 2023, with a total issuance volume of VND297 trillion ($11.6 billion). Outstanding government bond debt currently stands at some VND1,000 trillion ($39.2 billion), or 9.8 per cent of 2023 GDP and representing 7.4 per cent of the economy’s total debt.

Efforts to refine the legal framework governing the bond market continued throughout 2023. On November 29, the government issued Decree No. 83/2023/ND-CP, amending and supplementing Decree No. 95/2018/ND-CP. It introduced new methods for issuing government bonds through agents and enhanced regulations concerning the issuance of government bonds in foreign currencies. It also revised the process for determining auction results, shifting from multiple prices to unit prices, and clarified procedures for selecting principal / guarantor organizations.

Additionally, Decree No. 08/2023/ND-CP, issued on March 5, 2023, made amendments and supplements and suspended certain provisions of existing decrees governing the offering and trading of government bonds in both domestic and international markets. This provided companies with additional time to restructure their debts.

Meanwhile, Circular No. 30/2023/TT-BTC, dated May 17, 2023, provided guidance on various aspects of the bond market, including registration, deposit, exercise of rights, ownership transfer, transaction settlements, and market organization for separately-offered government bonds in the domestic market. It aimed to establish a legal framework for a dedicated bond market catering to professional securities investors, thereby enhancing transparency from the issuance phase to trading.