VND 305,000 billion of real estate corporate bonds maturing in the next 3 years, CEO of FiinGroup pointed out 4 challenges of the market

Maybank organized its annual investor conference, Invest ASEAN 2022 on June 8-9, 2022 in 6 major cities in Southeast Asia (Kuala Lumpur, Singapore, Bangkok, Jakarta, Manila and Ho Chi Minh City). Ho Chi Minh City) with the theme “ASEAN – Shaping the Future”.

After the incident of Tan Hoang Minh, the corporate bond market (Corporate bond) slowed down and underwent a review by the management agency, there were many mixed opinions that this market was too risky. At the discussion session “Vietnam’s bond market: Clearing out the sea”, 3 guests were Ms. Ta Thanh Binh, Director of Market Development Department, State Securities Commission, Mr. Nguyen Quang Thuan, Chairman cum General Director of FiinGroup Joint Stock Company, Ms. Le Hong Lien, Director of Investor Relations, Techcombank shared a multi-dimensional view of the bond market as well as opinions of market members on the correction of the bond market. amending Decree No. 153/2020/ND-CP on private placement and trading of corporate bonds.

Capital mobilization through corporate bond channel is very large

Sharing about the current situation of the corporate bond market, Mr. Nguyen Quang Thuan, Chairman and General Director of FiinGroup Joint Stock Company, a unit licensed for credit rating services, said that Vietnam’s capital market encounters a very large information asymmetry.

According to Mr. Thuan, in the past, the capital of Vietnamese enterprises mainly relied on banks, when the economy developed, the capital demand of the market was very large while the resources of the banks were not enough, so in the last 5 years, the The size of the corporate bond market has grown very strongly, the growth rate in recent years has been at 40%/year, reaching 15% of GDP.

In the past 5 years, the bond market has played a huge role and without this channel, the economy would not have grown as it did in the past. In the 2 years of Covid, the total scale of 11 million billion in bank credit could not meet medium and long-term needs. FiinRatings data shows that capital mobilization from corporate bonds in 2021 is VND715,000 billion, while the value of medium and long-term new loans of commercial banks is VND700,000 billion and equity capital mobilization from the stock market is VND101,000 billion.

Bond issuers are mainly banks and real estate, energy and construction businesses. In the scale of 1.5 million billion VND in circulation, the banking system mainly issues bonds to increase tier-2 capital, the distribution securities companies account for less than 25%, so according to Mr. professional and non-specialist individual investment (about 300,000 billion VND) is the main concern.

Issuing activities are less active due to “healthy” measures

305,000 billion VND of real estate corporate bonds mature in the next 3 years, CEO FiinGroup pointed out 4 challenges of the market - Photo 1.

According to Mr. Nguyen Quang Tuan, the corporate bond market is facing four challenges.

Firstly, legal changes are at a sensitive stage, all market members and regulatory agencies are coming up with solutions to develop harmoniously and in the long-term in favor of the market.

Secondly, the banking industry does not tighten real estate credit but controls it more closely, Mr. Thuan’s message is to be selective, the real estate industry has 7-8 different segments, so it is advisable to tighten the land plot, while the market If people have real needs, they can apply the model like China, a family with 3 children can buy 2 apartments, is this data so Mr. Thuan recommends applying digital conversion. into the bond market, not in general.

The third challenge is the debt capacity of enterprises, especially large listed enterprises. Meanwhile, the project enterprises set up to borrow money have to tighten because their credit capacity is very weak, the ability to repay the principal is 8 times, that is, the debt ratio is 8 times higher than the ability to create money in the future. At that time, the 3-year bond term should be seriously unbalanced. Mr. Thuan recommended that it be necessary to standardize the issuance conditions because the capacity of enterprises without records is a problem.

The fourth challenge, the modification of bond issuance to maturity. If stopped, according to Mr. Thuan, this is like “the train that is running at a standstill will fall down”. The nature of the bond market is to allow debt restructuring, new investors’ taste for longer terms or higher or lower interest rates, the problem is that businesses must be transparent. The debt is due, the business runs out of money while the project is still deployed. The problem is that if the business is transparent, investors are willing to participate. If the policy changes, the due debt will cause a great burden, not only affecting bondholders but also the banking system because a business usually borrows from two sources: 50% bank credit, 50% corporate bonds, so the possibility of cross default is there, so the policy should be flexible.

According to data of FiinRatings, the size of corporate bonds of the real estate industry is about 487,000 billion dong at the end of April 2022 and about 63% of this figure with about 305,000 billion dong will have a maturity point in the next 3 years (2022-2024). ).

305,000 billion dong of real estate corporate bonds mature in the next 3 years, CEO FiinGroup pointed out 4 challenges of the market - Photo 2.

Need to tighten regulations on professional investors

According to Mr. Nguyen Quang Thuan, the regulator plans to propose to the National Assembly to change the definition of professional investor in a stricter direction. “If I am proposed, I want to change the amount of bond investment completely, for example, if I want to buy 1 billion bonds, the investor must have 10 billion, the draft is for investors to maintain NAV 2 billion continuously in the future. 2 years is also a way. In my opinion, it is impossible for individual investors to pour money through bond funds because that is their right, they only pour money into good-performing funds.”Mr. Thuan commented.

305,000 billion dong of real estate corporate bonds maturing in the next 3 years, CEO FiinGroup pointed out 4 challenges of the market - Photo 3.

Ta Thanh Binh, a representative of the management agency, said that currently individual investors are holding over 30% of the corporate bond market, but is that number dangerous?

It is important that out of which 30% are held by professional investors. If there are a lot of non-specialist investors involved, that’s a concern, because our concern with private placement bonds is to borrow and pay for yourself and to do that, investors must understand when buying. bond nature, capable of self-responsibility when buying bonds.

However, due to many reasons, possibly wanting high interest rates, investors who do not meet the standards they participate in without fully understanding are at risk to themselves, thereby affecting systemic risk.

I think that raising the standard of conditions to become a professional individual investor is only one part, if we increase to 1 million USD to become a professional investor, then people still have a way around if they want other benefits for their home. Individual investors can gather together to ask the person in their name to buy for them. We think that it is necessary to strictly handle those who support these amateur investors to circumvent the law in order to access products and buy, such as sanctioning securities companies and issuers who offer improper products. Products“, Mrs. Ta Thanh Binh commented.

According to Ms. Binh, in the coming regulations, individual investors who want to participate can participate through professional investment institutions, such as investment funds, which reduces the number of individual investors. Multiplying down, increasing professional investors is also a way to reduce risks for the market.

Another solution is to organize the secondary market. In the provisions of Decree 153 mentioned, individual bond issuers can choose either VSD for registration or depository or as a noted member (which is a securities company), in fact the majority of issuers. implemented through securities companies, the proportion of registration via VSD is very low, a few %. This makes the trading market between these investors not transparent, making risk control more difficult.

One of the amendments in this Decree is that issuers put bonds on a centralized trading platform. According to Ms. Binh, the plan to organize the market has been approved by the Ministry of Finance, waiting for the Amendment Decree 153 to be officially issued, and the infrastructure is already prepared. This will help investors participate in the corporate bond market in a methodical, transparent manner, with transaction prices listed publicly, reducing risks.

The bottlenecks of the draft amendment of Decree 153

According to Ms. Le Hong Lien, because the market is developing quite hot, the management agency has a legal framework for units to participate in sustainable development. From the perspective of the participating units, the constantly changing regulations leave players in the market without a stepping stone to prepare. Bond issuers must prepare very carefully, and the issuance of regulations should take a longer time from consultation to amendment.

“In the current more than 1 trillion bonds, banks account for more than 30%, this is no need to worry because banks play with each other, the amendment of Circular 153 is quite tight and applies hard to all members. The market needs to consider the current ground, to have a period of time and distinguish between the participating components for more reasonable regulation“, the representative of Techcombank suggested.

Mr. Nguyen Quang Thuan expects that the draft amendment to Decree 153 will not prohibit the use of capital raised from bonds to invest in shares, stocks in any form and M&A. Since the bond market would shut down in doing so, ideally the intended use of the funds should be transparent.

Secondly, in terms of issuance conditions, loss-making enterprises are not allowed to issue bonds. In reality, one of the three biggest issuers is energy, today businesses need 12-13 years to break even, 3-5 years later to make a profit, according to Mr. Thuan, it may be an accounting loss. but positive cash flow is the bondholder’s preference, then why should they profit, if classified and applied flexibly, it will really ensure the Government’s goal of developing a sustainable and long-term healthy corporate bond market.

Ms. Ta Thanh Binh said that the goal of the management agency so far, the financial market development strategy to 2030 approved by the Government in March 2022 affirms that we must continue to develop the financial market. financial markets with the goal of balancing the bond and stock markets. “In the past time, we have developed the government bond market very well, the corporate bond component has only developed in recent years. The general view of the management agency is to develop the corporate bond market, considering it as a structure. As part of the integration into the capital market, the recent move of the regulatory agency to correct and regulate legally is not to tighten this market, but to develop it in a sustainable way. by 2025, the size of corporate bonds will reach a maximum of 20% of GDP, 25% of GDP in 2030. By the end of 2021, the size of the bond market will be 15% of GDP and by the end of the first quarter of 2022 it will be 16% of GDP, the growth rate of the past few months. This may slow down, but the view of the regulator is to be sustainable and strong.” cue-thi-truong-20220608223759017.chn

According to Chau Cao

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