Bank opens bond services

Vietcombank hopes to turn heads with its entry into bond trading services

Vietcombank’s general director Vu Viet Ngoan said bond exchange, purchase or sale could be implemented through Vietcombank, and the kinds of bonds would be listed with flexible interest rates — based on the market’s supply and demand.
At present, Vietcombank will limit itself to trading local currency bonds from the government, treasury, development assistance funds, and corporations, but in the near future will start trading foreign currency bonds. Economists said Vietcombank’s participation in bond trading services would create a thriving market. Prior to the bank’s involvement, institutional investors and individuals that wanted to trade in bonds were forced to buy on the black market or the bourse. The securities market, however, has been ineffective for this purpose.
Bonds in Vietnam commonly have the minimum duration of five years, and it is problematic for institutional and individual investors to sell bonds that have not matured.
Le Xuan Nghia, head of the State Bank’s Banking Development Strategy Department, said issuers like the Development Assistance Fund (DAF), insurance firms and companies would find it easier to mobilise capital through bond issuance, as investors would realise the high liquidity of bonds with Vietcombank’s participation.
He said, with foreign currency bonds being released in the near future, domestic investors would have opportunities to make indirect investments in bonds issued by international organisations abroad.
In return, foreign investors would have opportunities to access corporate bonds issued by domestic companies. Several financial experts said that with the present market scale at nearly $5 billion in bonds, it was a fertile business chance for traders such as Vietcombank, and they forecast that the bank would have to cope with rival competition as increasing numbers of foreign investors entered the market.
Pham Phan Dung, head of the Banking and Financial Department of the Ministry of Finance, said a comprehensive financial market had gradually developed in Vietnam, and that it would create good conditions for companies who planned to mobilise long-term capital through bond issuances.
A DAF manager, who preferred to remain anonymous, said with the participation of traders such as Vietcombank, the DAF would not have to face more failures in bond issuances, and added that it would be easier for the fund to mobilise huge sums to inject into the economy.