Lenders still most active in corporate bond issuance

According to Ministry of Finance data last week, the average daily trading value of the corporate bond market has reached $424 million so far in 2024, marking a 62.5 per cent increase compared to last year. In the first seven months of 2024 alone, 183 successful bond issuances raised almost $7 billion, more than doubling the figure from 2023.

Lenders still most active in corporate bond issuance, illustration photo/ Source: chinhphu.vn

The banking sector has been the most active in bond issuances, with significant contributions from Techcombank, ACB, and MB. The real estate sector followed, issuing bonds worth around $1.3 billion. Real estate bonds continue to offer the highest interest rates, averaging 12 per cent per annum, with shorter maturities of around 2.7 years.

Nguyen Quang Thuan, chairman of FiinGroup, observed during a seminar last week that the bond market is showing signs of recovery after a period of stagnation and difficulties, describing it as a “soft landing”.

Thuan noted that this improvement is particularly evident in older bonds, such as those related to real estate and renewable energy.

“The market is entering a new phase with increased participation from transparent, high-quality companies, including those issuing bonds for infrastructure, water, and waste management,” Thuan told VIR. “The involvement of guarantee organisations has contributed to the market’s steady development, with a focus on depth and sustainability.”

Looking ahead, he highlighted the government’s ambitious goal of expanding the corporate bond market to 25 per cent of GDP by 2030. “This is a bold target, and achieving it will require significant policy efforts,” he remarked.

After more than a year of operating the private bond trading system, Vu Thi Thuy Nga, deputy general director of the Hanoi Stock Exchange, reported that the exchange has processed and listed 1,146 bond codes from 301 enterprises, with a total value of $33.3 billion.

Liquidity has improved, with an average trading volume of $148 million per session, primarily driven by credit institutions (38.3 per cent) and securities (nearly 32 per cent).

Despite the warming of the corporate bond market and the diversification of issuances across various sectors, risks for investors, particularly individuals, remain significant.

Although the Law on Securities of 2019 and subsequent decrees have raised the standards for qualifying as a professional investor, meeting these criteria does not necessarily ensure an investor’s ability to assess bond risks. The law currently considers only capital value, requiring individuals to maintain an average portfolio of at least $80,000 over a minimum of 180 days, excluding borrowed funds.

Nguyen Anh Minh, deputy head of the Bond Registration Management Department at the Vietnam Securities Depository, expressed concerns about the current process for determining professional investor status, which relies on certification from securities companies. “Investors often follow advice from brokers or relatives, leading to significant risks when issuers fail to meet their debt obligations,” Minh explained.

The State Securities Commission of Vietnam (SSC) has acknowledged the urgent need to revise the criteria for professional investors as outlined in the Law on Securities.

Vu Thi Chan Phuong, chairwoman of the SSC, called on market participants to continue improving products in the bond market by enhancing standards for issuers and implementing stricter controls on bond quality through increased use of credit ratings. “We must consider tightening conditions for private bond issuance to prevent newly established companies with little or no operational history from issuing bonds at multiples of their equity capital,” Phuong said.

However, the bond market is also facing growing challenges as the number of companies delaying bond payments continues to rise.

MB Securities warns that the second half of 2024 is expected to bring significant pressure, with approximately $3.8 billion in bonds due for payment by year-end. In July 2024 alone, three additional companies announced delays in principal payments, bringing the total number of firms with overdue payments to 116.

“We estimate that over $3.8 billion in bonds will mature in the second half of 2024, with the real estate sector responsible for more than $2.5 billion, or 65 per cent of the total maturity value.”

Economist Dr. Le Xuan Nghia emphasised that failing to address defaults on principal and interest payments undermines investor confidence. “The most effective solution is to allow insolvent companies to declare bankruptcy. For companies that are unable to meet their debt obligations and are in a dire situation, bankruptcy should be the course of action, and investors must learn to accept the associated risks and losses,” he said.

Legal basis for corporate bond issuance important for real estate sector Building a solid and long-term legal basis for corporate bond issuance was an urgent solution to build a capital market for the real estate sector.

Recovery in bond issuance not yet confirming turnabout The recent influx of defaulted bonds is primarily due to an increase in restructured bonds caused by recent regulation adjustments, according to a new report.

Corporate bond issuances more than double in seven months Companies issued 161.5 trillion VND (6.43 billion USD) worth of bonds during January-July, or 2.6 folds higher than the same time last year, the Ministry of Finance (MoF) said on August 5.