How would Tan Hoang Minh corporate bond cancellation affect to banks and property firms?

According to information published on the Corporate Bonds Information Service, all of the bonds described above are backed by either land-use rights with value certificates or stocks with a valuation of up to 130-200 per cent of bond offerings

However, given that they are mostly unlisted businesses, bondholders must need a certain amount of time to liquidate related collaterals.

According to Vietcombank Securities (VCBS), indeed, the majority of these bonds were offered to private investors with a range of value and maturity options. To add to this fact, out of the eight bond lots that were previously declared, two lots have already made the first interest payment to bondholders.

“As a result, it is necessary to await the release of the government's guidance papers on the bondholders' settlement. Bondholders must be patient until relevant authorities provide guidance materials,” VCBS believed.

If the management agencies can work with Tan Hoang Minh to ensure that the interests of bondholders, which include both organisations and individuals, are properly addressed, the scale of the problem will be limited.

However, if Tan Hoang Minh defaults or goes bankrupt, the financial market and the banks involved in granting credit to Tan Hoang Minh will suffer greater spillover effects, the brokerage predicted.

For banks, the cancellation of Tan Hoang Minh's bond offering has had a little direct effect on their financial performance. In terms of bank participation as bond purchasers, according to available information, credit institutions participated in at least three bond offerings by the Tan Hoang Minh group, with an estimated value of VND3 trillion ($130.4 million). However, when compared to the total credit of the whole banking system, the value from the aforementioned three issuances and the total value of VND10 trillion ($434.8 million) from the entire nine issuances are still insignificant amounts of money.

For real estate companies, Tan Hoang Minh scandal will have a significant adverse effect on their capacity to obtain money in the near term, as investors will be warier about the soundness of corporate bond instruments. In the background of the fact that corporate bonds have emerged as a significant source of funding for real estate enterprises since 2018 when the State Bank of Vietnam has kept a firm hand on credit sources flowing into risky sectors.

“When it comes to the corporate bond market, bondholders, especially real estate ones, can consider early settlement time and accepting penalty or selling at a discount. In the meantime, financial institutions can benefit from fees, but will be under pressure to absorb this sudden supply,” VCBS said. “This can create a shift of capital flows to other investment channels such as stocks, real estate or gold in the context that bank interest rates are still maintained at low levels compared to the time before the epidemic. More broadly, from the perspective of regulators, this is a necessary step to ensure the healthy and sustainable development of the corporate bond market in the long term.”

In general, there will be an increase in investment money flowing into Vietnam as a result of recent regulatory agency measures against banking and securities industry infractions. This will help to clean up the stock market.