Instability remains risk for bond market

It is hoped market liquidity will be enhanced through Vietnam’s new corporate bond trading platform

The Hanoi Stock Exchange (HNX) last week inaugurated a trading platform for privately issued corporate bonds, a move that is expected to list over 1,600 individual corporate bond tickers for trading.

Speaking at the launch, Minister of Finance Ho Duc Phoc underscored the importance of the new system, expressing optimism that it would enhance market liquidity. However, he cautioned that the launch marked the start of a journey, with significant work ahead to develop a market that aligns with the country’s economic maturity and expands access to international markets.

Vu Thi Chan Phuong, chairwoman of the State Securities Commission (SSC), acknowledged that the growth of the private corporate bond market had exposed some limitations.

“Some businesses had issued bonds for inappropriate purposes, leading to legal violations and subsequent penalties. Difficulties in business operations had compelled companies to extend bond maturities, affecting the issuance of private bonds and causing instability in the financial market,” she said.

She added that the introduction of the bond trading system was anticipated to increase transparency and enhance market liquidity, offering regulators, market participants, and the investing public access to more information.

“It is expected that investors will assume greater responsibility for their trading activities, while state agencies can strengthen their oversight of compliance with regulations on private corporate bond transactions,” Phuong said.

In the inaugural trading session on July 19, four distinct bond securities were transacted in a total of 39 individual orders. The cumulative trading volume across the market exceeded five million bonds, amounting to an aggregate value of over $74 million.

At the commencement of trading, 19 separate bond issuances from three different companies were approved for immediate trading.

Vietcombank listed bonds across 15 distinct codes, with maturity terms ranging 7-10 years. Each bond from this issuance carried a face value of approximately $41,700.

Meanwhile, VinFast listed bonds under three separate codes, all bearing a maturity of 36 months. The face value for these securities came in two denominations.

Market watchdogs believe that the operation of the private corporate bond trading platform will contribute to thawing the market, unlocking capital flows and attracting more investors to participate.

Le Thi Thanh Tam, strategy director of Mirae Asset Securities, said, “This advancement provides investors with access to comprehensive information on bond prices, supply, and demand. Additionally, it offers issuers an additional trading channel to enhance liquidity for privately issued bonds, relieving them of pressure.”

Nguyen Quang Thuan, chairman of financial data provider FiinGroup, predicted that the approach of making broad public offerings would require more time.

“We believe that businesses, whether listed or not, which exhibit high transparency, possess a robust issuance profile, and demonstrate strong credit rating results, will increasingly stand out in the current market, especially when they offer a higher interest rate,” Thuan said.

“This is particularly true because bank deposit interest rates are currently dwindling to considerably low levels. As such, we anticipate that bond products will gradually solidify their position in the marketplace.”

Data from the HNX in June recorded 13 private corporate bond issuances with a total value of approximately $340 million. The real estate sector was the largest issuer, with a total value of around $162 million, accounting for 47.5 per cent of the total.

Data from the Vietnam Bond Market Association and the SSC shows that in the first week of July, there was only one private corporate bond issuance by Techcombank Securities, with a total value of approximately $16.7 million.

Cumulatively, from the beginning of the year to date, the total value of corporate bond issuances recorded was more than $2.46 billion. The total value of bonds repurchased by companies before maturity since the beginning of the year was over $4.85 billion, up 35 per cent compared to the same period last year, but the pressure of bonds due is still significant.

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.

Creation of trading platform to overhaul bond market In a strategic move to bolster liquidity and instil renewed faith in Vietnam’s corporate bond sector, the Ministry of Finance is on the cusp of introducing a trading platform exclusively dedicated to corporate bonds in July.