Creation of trading platform to overhaul bond market

This highly anticipated system is set to lay the groundwork for bondholders to conduct seamless transactions in the most favourable market conditions, thereby reviving trust in the corporate bond market.

Creation of trading platform to overhaul bond market, Illustrative image (Photo: VNA)

Deputy Minister of Finance Nguyen Duc Chi, shed light on the forthcoming initiative, saying that regulatory bodies will inaugurate the independent trading platform next month.

“The platform’s advent will provide a robust foundation for bondholders to execute transactions with utmost ease, effectively fostering optimal liquidity in the market. This concerted effort is poised to reinstate investor confidence in the bond market, breathing new life into its core operations,” he said.

Amid the prevailing challenges pervading the bond market, he underlined that the difficulties stemmed from existing economic realities and the overall performance of businesses, including bond issuers. Consequently, the issues require a comprehensive and synchronised solution that encompasses macroeconomic stability, production equilibrium, sustainable growth, and efficient business operations.

Ta Thanh Binh, head of Market Development at the State Securities Commission (SSC), said, “This secondary market specifically tailored for privately issued bonds will establish a fair playing field, ensuring transparency and clarity for discerning investors.”

According to the Hanoi Stock Exchange (HNX), as of mid-June the majority of bonds nearing maturity are predominantly concentrated within the real estate sector, amounting to a substantial figure of VND96.82 trillion ($4 billion), representing 51.7 per cent of the total bond market.

The banking sector follows suit, accounting for $1.3 billion, capturing a sizable 16.9 per cent market share. During the reporting period, five companies disclosed delayed payment of principal and interest, totalling a considerable $93.25 million, while two enterprises unveiled their debt restructuring plans.

In light of these developments, the Ministry of Finance (MoF) reports that the value of corporate bond issuances in Q1 2023 has dipped by 63 per cent compared to the same period in 2022. However, there has been a remarkable surge of over 50 per cent when compared to the previous quarter, indicating a steady recovery trajectory.

The issuance activities initially experienced a sluggish phase but regained momentum after the implementation of Decree No.08/2023/ND-CP on March 5, which helped kickstart the placement of new bonds.

Binh from the SSC underscored the pivotal role of member securities companies in effectively regulating market participants.

“The introduction of the secondary bond market enhances transparency in the corporate bond market, improves accessibility from issuing entities to investors, and elevates payment standards while mitigating potential risks,” she said.

To facilitate the operation of the bond market, the SSC is expediting the restructuring process of securities companies in the market, aligning their products according to the guidelines set by the Ho Chi Minh Stock Exchange, which will oversee stock and fund certificate transactions. Conversely, the HNX will facilitate bond and derivative transactions.

Vu Duy Khanh, director of Investment Analysis at SmartInvest Securities Company, said that the integration of bonds into a unified trading platform would eradicate cumbersome manual procedures and circumvent illicit practices that have previously undermined the market’s integrity.

“Moreover, the process of retrieving funds from bondholders will be streamlined. By introducing a platform that infuses liquidity, the current market will bear semblance to repo products, wherein investors can enjoy fixed interest rates. However, the listing of bonds on this platform will introduce liquidity and engender trading dynamics reminiscent of stock transactions, thereby fostering heightened competitiveness,” Khanh said.

Bond rule tweaks loosen constraints To address issues of transparency and investor protection, the government has issued a new decree that introduces several key changes to the regulatory framework for corporate bonds in Vietnam.

Bond repurchases to help prop up cash flow situation It is anticipated that financial institutions will be entering the market to purchase corporate bonds in the near future, according to a draft amendment currently under consultation.