‘The stock market has experienced 4 collapses, but it’s still moving forward’
Vietnam Week introduces Dr. Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, on developments in the corporate bond and securities markets.
Corporate bonds cannot “open now, close tomorrow”
According to international practice, there is no way that corporate bonds are guaranteed by assets, such as real estate. The reason is that the bond buyer is an individual while the issuer is an organization, so the handling of collateral is extremely complicated.
Besides, it is impossible to monitor the purpose of using the bond capital of the issuer. The banking experience shows that. Banks lend according to the progress, send all staff to sit at the project but still cannot supervise (the use of capital), let alone the individual who buys corporate bonds, how can they monitor the issuer? What does the bond issuer use that capital for? That is, international practice does not matter how that capital is used.
The world has a completely different approach to bonds than we do. One must have a company rated a business, a business rated A has to go through a multitude of criteria, each of which is carefully calculated, new enough for a bond issue. For example, in China, people can buy bonds of Vietnam and Eastern Europe without much conditions, just need to register for the correct 6-page dossier, the rest have a rating certificate of a rating company. reputable class. If anyone does not want to take risks, it is best to borrow money from a bank, not to issue bonds.
We are recommending that if we just rush to monitor the use of capital, we will get bogged down. We have to change the law in that direction. If you keep struggling to secure assets, this makes the issuance of Vietnamese bonds different from international practices.
The best thing to do right now is to speed up the ranking companies. Currently, there are 2 rating companies, but they are operating in limited operations and do not have enough experience and credibility to expand their scope. It is necessary to license the operation of rating companies, allowing them to enter into joint ventures with international companies to quickly conduct the rating of Vietnamese enterprises, as a foundation for the development of the bond market in the future.
And if we keep opening, closing tomorrow, releasing now, tightening supervision tomorrow, the corporate bond market will be miserable and unable to develop. Currently, the majority of bond issuers are banks and real estate companies. Should have been, enterprises such as textiles, footwear, processing industry … must issue to get business capital, investment, but high interest rates like this, they can not stand.
Therefore, if the bond market is allowed to grow sluggishly within a narrow legal framework, how can there be a start-up business? Interest rates and terms like that, start-ups can’t stand it. Therefore, I think that managers need to have a more open view, not because of some incidents like the one just now, thinking that the bond market is having something terrible.
Experience in handling Tan Hoang Minh case
Regarding what happened around Tan Hoang Minh, I think there is a way to deal with it. First of all, it is necessary to refer to how China deals with Evergrande Group. The Chinese government fully guarantees with bonds issued by Evergrande, amounting to about 2% of GDP, a very large number.
They guarantee the bonds of this corporation to maintain credibility with international investors, and at the same time, stand out to settle the money people have ordered to buy Evergrande’s houses, assigning the local government to accelerate the implementation of projects. That is, return the house to the people in accordance with the committed schedule.
With Tan Hoang Minh, we have not had to do so, the number of bonds issued domestically is not terrible and bonds issued abroad are almost nonexistent. I think that Tan Hoang Minh’s assets must be used to return investors not for this investor but for all other problems for future investors and for the bond market. future.
That recommendation has been sent to the Government, we handle this case well to maintain investor confidence and support the market to continue to develop.
The right policy needs to be protected
The policy of issuing corporate bonds is correct because it helps reduce the burden on monetary policy. In the total financial market share, the total bank assets accounting for 95% is very large. Banking activities are dominating the financial market. That reflects underdeveloped financial markets, as well as an underdeveloped economy.
Japan 40 years ago also had a large stock market, but most businesses still depend on bank credit. We are in the same situation now, but it is also common because throughout the development length of countries, there are periods when businesses use mainly bank capital.
In the last 20 years, credit structure in countries has changed rapidly. In Europe, credit capital for businesses, including real estate and manufacturing businesses, accounts for only 20%. Vietnam, on the other hand, accounted for 80% of outstanding loans.
So where does 80% of the credit capital of European banks go? The largest proportion is poured into real estate, housing accounts for about 30%. The second largest proportion is vehicles and personal vehicles. I remember that loans for real estate and personal vehicles amounted to 71% of total credit in Europe in 2017. In the US, it was only slightly lower.
That said, let’s gradually let businesses gradually rule out banks, depending only on short-term working capital. Long-term capital must be bonds and stocks. Most importantly, businesses need to accumulate capital.
Dealing with rumors
Recent developments in the stock market stemming from rumors of this and that are normal. Every time something like this happens, it has a very strong impact on the stock market. Perhaps, many people still remember the reaction of the market around the time when Kien was elected and Mr. Bac Ha was arrested… This time such an impact is decreasing, becoming a shock that is nothing too terrible like previous cases. .
That shows that the market size is larger, more resilient, consumers and investors are getting used to those risks.
Investors need to get used to it from the experience of other countries, such as Korea. No matter what the president of Daewoo and Samsung corporations have, the corporations themselves are still growing and developing. Their solid legal foundation ensures business development.
In Vietnam, we have seen, the ACB case happened, but after that, ACB was still one of the leading banks; or Mr. Bac Ha happened and then BIDV still developed. The government always chooses to handle such individual cases but still preserves businesses and lets them develop.
I believe the stock market still has strong growth potential. The proportion of people dealing in securities in Southeast Asia is up to 40-50% of the population, while in Vietnam it is only 3%. Just look at the development of lottery or lottery to see, it is not that Vietnamese people do not like risky business types. In the long run, more and more Vietnamese will participate in the stock market.
The important fulcrum of the market
Despite certain hiccups, the stock market has important points of support. That is, Vietnam’s economy has recovered quite quickly and strongly, especially in the service, processing, manufacturing, and export sectors.
Moreover, the macroeconomic background is quite stable. We calculate, this year’s inflation may be above 4%, which is far different from many predictions of 6-7%. That is a great success in terms of macroeconomic management compared to the record high inflation in the past 40-50 years in the US and Europe.
That foundation is strengthened by the fact that we can export oil, can take care of our own food and food, and importantly, the Central Bank keeps a reasonable credit growth rate of 13-14%, keeps the exchange rate. stable. Maintaining macroeconomic stability is a positive condition for the stock market recovery.
Vietnam’s stock market today has developed quite quickly compared to the previous period. The relevant laws are also quite strict. The problem is that in the market there are battle groups, crews whose activities and engines must be monitored and warned. When an abnormal phenomenon is detected, it must be monitored and corrected immediately to ensure market transparency, to ensure market confidence.
The Prime Minister’s advisory group has recommended many times that the Securities Commission become an independent agency directly under the Government, not within the Ministry of Finance. Because the Ministry of Finance is the treasury management agency that needs to be stable and tight, but now embracing the high-risk securities sector is not good.
In such a separation, the agency has the power to inspect, supervise, investigate and sanction. But now, they only write a sentence “with signs of violation” and then transfer to the Ministry of Public Security to investigate, but how many officers of this Ministry have securities expertise to investigate.
Recently, an American economist said that humanity is living in an era of chaos, or chaos is the criterion of the new normal. We live in an era of tremendous changes in technology, in terms of epidemics… So is the stock market.
There has been a time when long-term bonds yielded lower than short-term bonds, the yield curve inverted, and on that basis the stock market would have crashed. However, from 2008 to now, we have gone through 4 times like that without seeing any collapse, the stock market is still moving forward. And it will be the same this time.
Lan Anh comb
at Blogtuan.info – Source: vietnamnet.vn – Read the original article here
