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What signs help investors identify poor quality bonds?

In recent times, corporate bonds (DN) has become a large and important capital mobilization channel in the market. In addition to the positive effects on businesses, the release Stock Private placement also revealed many risks for investors, especially after the incident when the State Securities Commission issued a decision to cancel 9 separate issuances of bonds, with a value of more than VND 10,000 billion of bonds. 3 companies under Tan Hoang Minh Group.

The reason for the cancellation of 9 lots of bonds is because “there is an act of disclosing false information, hiding information in private bond issuance activities”. Although it is an underground sale, this business can still raise more than tens of trillions of dong from investors. Why do investors still buy these shoddy bonds?

Structure of Vietnam’s bond market

Currently, bonds issued to the public (in the form of bonds listed with high transparency) account for only 4%, while bonds issued by private placement (with lower standards of information disclosure and higher risk higher) is accounting for 96%.

Real estate rose to be the group with the largest share of issuance. In the past 5 years, bonds have become an important mobilization channel for real estate enterprises, with an average issuance value of approximately VND 100,000 billion/year, contributing 30-40% of the total value. issued corporate bonds.

More than 80% of the value of corporate bonds issued by the real estate industry belongs to unlisted enterprises. These businesses have alarmingly weak financial health. This is reflected in the level of financial leverage Net Debt/Equity is currently up to 8.1 times, while listed companies are only 2.5 times.

With the above data, it is clear that the amount of self-issued corporate bonds sold through securities companies or sold through banks, such as in the case of Tan Hoang Minh, in which bondholders are facing very high risks, are not accounted for the majority.

What signs help investors identify poor quality bonds?  - Photo 1.

In recent years, corporate bonds have become a large and important capital mobilization channel in the market. (Illustration image: PLO)

In fact, on the market, there are also quite reputable bonds such as bonds issued to the public by some large corporations or individual bonds of banks, securities companies and manufacturing enterprises. .

Corporate bonds officially distributed through banks or securities companies are evaluated and appraised, they are quite good because the purpose of issuance is clear, there are collateral assets and payment obligations for bondholders. , the buyer will have a certificate of guarantee.

But the amount of such bonds on the market is not much and the interest rate on such bonds is usually only slightly higher than the interest rate on bank deposits, about 7 – 8%/year… As for the private placement bonds of the company. The average real estate business is also over 10%, in some cases 12 – 15%.

If only looking at the attractiveness in the eyes of ordinary people is based on interest rates, privately issued real estate bonds are the top form of attractive bonds. But now many investors have understood about the risk in the bond market in particular and investment in general, that high interest rate means high risk. A business willing to pay high interest is a business that is too “hungry for cash flow”.

Mr. Nguyen Thanh Tung – Bond investment consultant said: “Joining in Tan Hoang Minh bonds, customers buy short terms from 6 months to 1 year, they see that the business side can guarantee their debt obligations. With customers and investors, when they find profit quite easy, they will tend to pour more money in, getting trapped in the later stages, not the beginning because they invest 500 million to 1 billion in the beginning. But when they find this channel attractive and put their faith in the bond channel, then they spend more money, some people have 50 billion, 100 billion also.”

Poor quality bonds are ambiguous in information disclosure

What signs help investors identify poor quality bonds?  - Photo 2.

The remarkable point of poor quality bonds is the ambiguity in information disclosure. (Artwork – Photo: VGP)

The remarkable point of poor quality bonds is the ambiguity in information disclosure. Many warnings are given that do not exclude the possibility that businesses may use bonds as a tool to reverse debt, use money from bond buyers to pay buyers first, potentially risking a domino collapse such as: multi-level deformation if not detected and handled promptly.

“Through a very complex cross-ownership matrix between businesses, especially with subsidiaries, and with the support of a few friendly banks, we need to see the reality that this is a complicated technique and investors are Personal privacy is difficult to recognize”, said Mr. Ho Quoc Tuan – Lecturer at the University of Bristol, UK.

In the market, there is a situation where the subsidiaries are bond issuers, the buyer is a brother company, and the money is from retail investors. In this situation, people do not have the rights of bondholders, but just investment cooperation, not lenders, to claim money. So how to avoid bonds like this?

What regulations should be in place to bind the responsibility of banks or securities companies to avoid them trying to bring bonds, even poor quality, to investors?

Around the above issues, the direct exchange between VTV reporter and Mr. Ho Quoc Tuan in the above VIDEO has more detailed analysis.

* Invite readers to watch programs broadcast by Vietnam Television on TV Online and VTVGo!

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