Healthy development of corporate bond market

With the strength of being a safe, low-risk investment channel with attractive interest rates, corporate bonds interested by many investors.

The Vietnamese corporate bond market has seen a growth in both the number of issuers and investors buying bonds in recent years.

Currently, bonds account for nearly 23% of total social investment capital each year. If in 2017, the size of the corporate bond market reached about 4.9% of GDP, by 2021, this number has increased to about 15% of GDP.

Corporate bonds are of interest to many investors. (Artwork – Photo: VGP)

According to the Ministry of Finance, in the first quarter of this year, the volume of privately issued corporate bonds continued to increase at VND 105.5 trillion.

The corporate bond market has become an important medium- and long-term capital mobilization channel for businesses, reducing dependence on bank credit channels in accordance with the State’s policy and developing a balance between capital market, bank credit market.

However, the fast-growing market has generated potential risks, some private corporate bond issuance activities have recently been violated and some serious frauds have occurred. prosecuted by the competent authority.

Solutions for healthy development of corporate bond market

From September 2021 up to now, the Prime Minister has issued 4 instructions on strengthening management, supervision, inspection and examination of the stock market and corporate bond market. The strict handling of a number of bond issuers that do not comply with the requirements of the law. Typically, the recent incident at Tan Hoang Minh Group shows that the authorities are determined to restore order in the corporate bond market.

Ms. Hoa (investor) has bought over 3 billion corporate bonds and will soon be liquidated. Ms. Hoa said that the Tan Hoang Minh case made her and many investors confused at first, but she continued to reinvest in corporate bonds.

“This is really just a government purge to make the bond market cleaner and more sustainable. I think with bonds with higher interest rates than banks and we find the businesses are safe, so why don’t we invest in bonds,” said Ms. Vu Minh Hoa, an investor in corporate bonds.

The Government has made very clear its stance on strictly and drastically handling wrongdoings and protecting investors, businesses and people.

The Prime Minister assigned the Ministry of Finance to coordinate with relevant ministries and branches to review mechanisms and policies to propose competent authorities to amend the Law on Securities, the Law on Enterprises, and Decree 153 and Decree 155. to improve standards and conditions for corporate bond issuance, contributing to a healthy and transparent market.

Following the Prime Minister’s direction, the Ministry of Finance is urgently submitting to the Government to amend Decree 153 on private bond issuance.

“We will monitor the purpose of issuance, scope and conditions of issuance, such as loss, bad debt, no guarantee of financial safety, nor issuance. When issuing, must register with the issuing authority. When using and completing capital, it must also be registered to ensure that capital mobilization focuses on project development and business expansion”, emphasized Minister of Finance Ho Duc Phuc.

The draft Decree additionally stipulates that the issuer must have a credit rating of a rating agency; at the same time attach the responsibility of independent auditing firms to audit the financial statements of the issuers and will revoke the licenses of the auditing firms that do not comply with the provisions of the law.

The drastic moves of the recent regulatory agencies are to ensure the market’s sustainable development without criminalizing civil and economic relations.

Efforts to clean up the market

A series of phrases “purge”, “aggressively” and “corruption net” have been used by many foreign media outlets and newspapers to talk about efforts to clean up the financial market in general, the stock market and the stock market. stocks and bonds in particular of Vietnam in the past week.

It shows the determination of the Party and General Secretary Nguyen Phu Trong in handling business violations that may cause discontent in society, and shows the Government’s determination in implementing this policy. a prerequisite to improve Vietnam’s image as well as continue to attract foreign economic organizations and businesses.

Newspaper Nikkei Asia Prime Minister Pham Minh Chinh at a recent Government meeting called for stronger measures to combat negativity and corruption in the real estate, bond and stock market sectors. The focus of the Vietnamese government has been affirmed in this regard.

Before that, page Reuters, Nikkei Asia and Bloomberg There was an article “Large enterprises in Vietnam are dealt with in an effort to fight corruption”.

“The Government’s determination to sanction wrongful business owners has greatly increased the confidence of the international community. This is a necessary action to make the Vietnamese market transparent, which is the basis for MSCI evaluates and upgrades the Vietnamese market from a frontier market to an emerging market in the near future. I must say that in the long term these are very positive actions,” said Mr. Tsuyoshi Imai, General Director of the company. Japan Securities, review.

Page Bloomberg and Finance Magnates Last week, Vietnam shared that Vietnam is strengthening supervision of financial markets to make its mark as a promising destination for international investors.

“Vietnam is catching up with other countries in the region in terms of market size. This is clear evidence of the Government’s efforts to improve the favorable environment for the market, including through key orientations. policies, regulations and many forums to raise awareness and develop the market,” said Mr. Zafer Mustafaoglu, Block Director, East Asia and Pacific Region, World Bank.

The objective analysis and positive assessment of the press and international organizations in the past week about Vietnam’s efforts to clean up the market show that the confidence of foreign investors has not decreased, even improved. Positive reception and increased confidence.

The role of bonds in business development

It can be seen that compared to other countries in the region, the corporate bond market size of Malaysia is 56% of GDP, Singapore 36.5% of GDP, Thailand 25% of GDP…, clearly there is room for market development. Vietnam’s bond market is still large, accounting for only about 15% of GDP. The target set by the Government is 20% of GDP in 2025.

The corporate bond market has become an important medium and long-term capital mobilization channel for businesses. (Artwork – Photo: VN Media)

26 years ago, Ree Refrigeration Electrical Engineering Joint Stock Company first mobilized convertible bonds, although there was no specific law at that time. The Ministry of Finance has approved this as a pilot case. Thanks to that, the business has successfully called for 5 million USD, with an interest rate of 4%/year. Up to now, the business has continued to grow and has raised thousands of billions of dong from the capital market.

The three main channels of business capital are still compared to a tripod: bank credit, stocks and bonds. Despite the impressive growth rate of more than 30% per year, the size of the corporate bond market only accounts for about 15% of GDP, which is less than 1/10 of the size of bank credit.

Many international organizations appreciate that the management agency has considered the issue of mandatory credit ratings with some bond issuance cases, instead of just tightening the issuance conditions. This helps the market have more expectations for a mirror that reflects the health of the issuer, avoiding the situation of “mixed gold”.

“Priority should be given to facilitating bond issuance for companies with good balance sheets, but as Vietnam is in the early stages of developing this market, it is still necessary to keep an eye on good companies in the long run.” Mobilized capital helps companies facing difficulties to recover from the pandemic, and also opens up investment opportunities for organizations”, said Mr. Hasira De Silva, Senior Director of Industry and Consumer Division using South and Southeast Asia, Fitch Ratings, commented.

According to financial analysis organization Fiingroup, the scale of bond issuance this year will gradually decrease. However, these are positive purges, decreasing in quantity but changing in quality in the corporate bond market.

The World Bank recently assessed that the Vietnamese market is still relatively young. Therefore, it is important that the way and the experience we draw from the development process, not overreact, limit long-term development.

The World Bank highly appreciates the Vietnamese government’s success in developing capital markets. The thriving corporate bond market is indeed an important source of long-term financing for investment and supports the country’s growth prospects.

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