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“Despite many economic difficulties last year, the bond market achieved an important development step in the mobilisation of financial resources for the state budget, financial institutions and enterprises,” Deputy Minister of Finance Tran Xuan Ha told a meeting which gathered key local bond market participants last week in Hanoi.
Statistics tell part of the story. In 2012, the government bond issuance totalled VND145.1 trillion ($6.97 billion), far surpassing the 2011 total of VND80.7 trillion ($3.87 billion).
In 2012, key cities such as Ho Chi Minh City, Danang and Hanoi began issuing municipal bonds. Till December 31, 2012, the total outstanding volume of municipal bonds reached VND9.1 trillion ($434 million), equivalent to 0.31 per cent of the country’s gross domestic product (GDP).
In the secondary market last year, liquidity saw many positive improvements with the traded bond volume staying high at more than VND1 trillion ($48 million) per day averagely.
This had helped boost the velocity of capital and allowed for the transfer of short-term capital into long-term funds for the country’s economic development, said Ha.
In terms of corporate bonds, the total issuance in 2012 hit VND24.3 trillion ($1.17 billion) and total outstanding corporate bond volume totalled VND25.9 trillion ($1.25 million) or 0.88 per cent of GDP. All issuances were through private placements.
The Ministry of Finance (MoF) has instructed the Vietnam State Treasury to issue VND150 trillion ($7.14 billion) of government bonds in 2013, of which VND90 trillion ($4.3 billion) would finance the budget deficit and VND60 trillion ($2.84 billion) be earmarked for several infrastructure projects.
Specifically, the plan composition by tenure for T-bills was VND30 trillion ($1.44 billion) for two years, VND30 trillion for three years, VND40 trillion for five years, VND40 trillion for 10 years and VND10 trillion for 15 years bond.
For government-guaranteed bonds, 2013’s targeted issuance volume is around VND58.1 trillion, of which VND18.1 trillion is for the Vietnam Bank for Social Policies and the remaining VND40 trillion is for the Vietnam Development Bank. The issuance volumes of government-guaranteed bonds in 2011 and 2012 were VND45.2 trillion and VND52.6 trillion, respectively.
“In general, we believe that the growth of government bond issuance in 2012 was contributed to by lower credit growth in the banking system. Thus, if there is no significant improvement for credit growth in 2013, government bonds will still be a safe place for commercial banks in the restructuring process,” stated Saigon-Hanoi Securities Incorporation in a bond report.
Currently, the Hanoi Stock Exchange is working on the cross currency repos and might introduce this product by the second quarter of 2013. If market participants are interested, they would permit the trading of this product from the fourth quarter of 2013.
A mechanism for creating primary dealers in the local bond market would be finalised this month. The MoF is also working on voluntary pension insurance or voluntary pension fund, to create more market participants in the future.
Meanwhile, the State Securities Commission is drafting a government decree on derivatives, with a focus on equity and bond index derivatives, with the first draft available in March and the decree expected to be issued late 2013. Other measures would still include reducing the number of tickers and large-size issuances, which authorities have instituted since 2011.
The Hanoi Stock Exchange (HNX) last week held for the first time an appreciation ceremony for the government bond market’s most active members, after the market witnessed extraordinarily growth in 2012. Vietinbank, the top primary market player, and others offer their forecasts to VIR.