Vietnam bond market fastest growing in East Asia

An unidentified person holds Government bonds in this file photo. The Government bond market in Vietnam has obtained an average annual growth rate of 23% in the past five years - Photo: TL

SSC unveiled the growth rate at a conference held in Hanoi City yesterday to review the Government bond market in the past five years.

Since September 2009, the Hanoi Stock Exchange has raised over VND654 trillion from G-bond auctions to secure medium and long-term funding for development investments. Of which, the State Treasury has raised VND513 trillion, or 13 times higher than in 2000-2008.

Since 2012, bond auctions have become a major channel for raising capital, with mobilization value rising gradually. Last year, VND194 trillion was mobilized, or 18% of total investments in the economy.

In addition, there has been significant change in product quality with the number of bond codes falling from over 300 to 90. Each code has seen average scale improving to VND4 trillion.

Liquidity on the market has also improved strongly from VND365 billion a session in 2009 to more than VND2.7 trillion a session in the first six months of this year.

Treasury bill auctions at the State Bank of Vietnam have also been held on the G-bond market since August 24, 2012, creating a concentrated market to facilitate investor trading.

At present, banks are the main investors on the G-bond market, holding 86% of the bond portfolio value. Insurance firms, fund managers and foreigners have also joined the market.

Since 2011, the ratio of foreign participation has increased to 20-30% in the secondary market and 12% on the primary market.

In a related development, the Asian Development Bank (ADB) in a recently released report said that emerging East Asia’s local currency bonds have performed well so far this year but an earlier-than-anticipated U.S. rate hike, a slowing property market in China, and higher risk aversion and inflation due to Middle East tensions could undermine that.

Vietnam was the fastest growing local currency bond market, both on a quarterly and an annual basis, according to Vietnam News Agency. However, China remains the largest market in Asia, with US$4.9 trillion in outstanding bonds.

According to ADB, emerging East Asia comprises China, Hong Kong (China), Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.