Constituting a healthy corporate bond market

The Ministry of Finance (MoF) is working on perfecting governmental Decree No.153/2020/ND-CP which regulates privately-placed corporate bond issuances.

One of the highlights of the amended decree is gearing individual professional investors’ attention to bond products of better quality, mandating enhanced conditions from service providers, and adding regulations about the rights and responsibilities of market supervisory bodies.

The MoF is working on perfecting regulations on corporate bond issuance and trading

Accordingly, in light of the proposed amended Decree, individual professional investors need to possess a bond value touching VND1 billion ($43,470), stock investment value reaching VND2 billion ($86,950), and an account value (not using margins) maintained at least six months.

In addition, investors must clearly understand the conditions, clauses, and risks associated with the bond investment, and ensure to fully abide by regulations before engaging in privately-placed corporate bond trading.

Moving forward, to close the loopholes leading to the illegal trading of privately-placed corporate bonds through authority investment and capital contribution agreements, the proposed amended decree rules that investors are not allowed to resell their bonds to individuals who are not professional investors.

To ensure the corporate bond market’s sustainable development, industry experts proposed that the MoF should introduce solutions to spur the development of intermediary financial institutions such as insurance firms, investment funds, and pension fund systems in order to fuel market demand as well as create safe investment channels to individual investors.

For its part, the MoF unveiled that it would require the State Securities Commission to review and appraise the operation of stock investment funds and bond investment funds in the direction of stimulating the participation of these funds in the corporate bond market and encouraging individual investors to join the corporate bond market resorting to such investment funds to mitigate risk.

Towards this goal, the MoF would consider adding regulations on stock investment funds to invest in privately-placed corporate bonds with high credit ratings.

According to the MoF, in the first quarter of this year, individual professional investors bought 9.5 per cent of privately-placed corporate bonds.

Increased inspections to improve corporate bond market The Vietnamese authorities are keeping a grip on credit institutions’ corporate bonds in the face of growing scrutiny, which might add to pressure for issuers to alter their funding strategies. Investors’ confidence and rights, however, are to be strengthened.

Selective corporate bond scale expected to widen Corporate bonds, in addition to credit channels and stocks, are now a major source of finance for firms, particularly for banks and real estate developers. However, much work has to be done as the channel is still in its infancy.

Loopholes and risks holding back bond market The State Securities Commission of Vietnam has recently cancelled nine private bond offerings of three companies under Tan Hoang Minh Group, laying open loopholes and risks that have been holding back Vietnam's bond market. Lawyer Nguyen Thanh Ha, chairman of the law firm SBLAW, spoke to Vietnam News Agency about the loopholes, the risks and his suggestion to reduce investors' risk exposure.

This means that most privately-placed corporate bonds were bought by securities firms in the primary market and were later resold to credit institutions, individual investors, and other organisations.

Reports by depositories show that nearly 289,000 individual professional investors possessed privately-placed corporate bonds by end of 2021. The figure rose to over 340,300 by end of the first quarter of this year. If capital pooling contracts are counted, this figure would be much higher.