Tag: Corporate bond market

Private investment has become one of key growth drivers.

The corporate bond market expected to account for 25% of GDP by 2030.

Close watch to be made over bond issuers with debt payment difficulties.

The Ministry of Finance will compile a list of bond-issuing businesses showing unusual signs, such as “hidden” issuances by subsidiaries in the same ecosystem, issuances with high interest rates, and outstanding loans many times larger than equity. It has also assigned the State Securities Commission to review and amend regulations relating to the offering and trading of corporate bonds.

According to a report from the Ministry of Finance (MoF) sent to the Prime Minister, a number of real estate businesses have issued bonds in volumes many times higher than equity, creating risks not only for investors but also for the financial system. The ministry has adopted many solutions to correct the market in 2022, including submitting a proposal to the Prime Minister on amending the legal framework on certain matters.

Many analysts believe that the draft amendments to Decree No. 153 from the government on the offering and trade of individual corporate bonds do not clarify the roles and responsibilities of financial intermediaries and agents, which create some confusion in the market. The Vietnam Chamber of Commerce and Industry (VCCI) proposes mandatory credit ratings as one of five fundamental solutions to stabilize the market.

The State Securities Commission (SSC) has requested that securities companies review all corporate bonds registered and deposited, in terms of volume, the status of principal and interest payments, and the type of investors holding such bonds, and to then report to the Hanoi Stock Exchange.

To improve Vietnam’s corporate bond market, the Minister of Finance has made three requests: review and amend regulations relating to corporate bond offerings and transactions; inspect the private placement of bonds at securities companies and enterprises; and closely supervise private corporate bond issuances.

State Bank of Vietnam (SBV) Governor Nguyen Thi Hong has said that the size of Vietnam’s corporate bond market is still small compared to elsewhere in the region and this puts major pressure on capital demand in the banking system. Other shortcomings include the absence of a specialized corporate bond market and the limited participation of foreign investors.

The moves of management bodies to purge Vietnam’s corporate bond market still had many feeling pessimistic, but the Fiin Group has affirmed these helped reduce volumes while boosting quality, with a good impact on the real estate market seen and little effect felt on credit quality.

The size of the corporate bond market has increased sharply in recent times, from 4.93 per cent of GDP in 2017 to 16.6 per cent in 2021. The market is likely to grow well this year due to supply and demand being maintained at high levels. Demand for issuances to ensure capital at enterprises is quite high. There will also be about VND266 trillion ($11.66 billion) of corporate bonds maturing this year.

FiinGroup analysts believe that interest rates on corporate bonds will rise during 2022. Two drivers are keeping issuance activities vibrant: the fact that 60 per cent of corporate bonds will mature in the next two years, and that spending on assets in the past two years has been lower than the five-year average, especially in the real estate sector.

Though Vietnam’s corporate bond market is quite young, it is rapidly growing in size. The Ministry of Finance is coordinating with other ministries and branches to strengthen supervision in the financial market, and the corporate bond market’s legal framework is gradually improving, providing a platform for sustainable growth into the future.