Help build market confidence
Corporate bond credit rating is expected to be an important fulcrum in assessing financial risks and promoting transparency in the bond market in Vietnam.
On January 1, 2024, the strict regulations of Decree 65/2022/ND-CP were officially restored, after a temporary suspension to give the market a chance to self-adjust through the difficult period. Accordingly, bond offering dossiers must have credit rating results, applicable to enterprises with a total value of bonds mobilized in 12 months greater than VND 500 billion and greater than 50% of equity, or total outstanding bonds greater than 100% of equity based on the most recent financial report.
After Decree 65 was restored, the corporate bond market has been heating up since the beginning of the year and the issuance volume has increased sharply compared to the low base level in 2023. However, the volume of newly issued bonds is mainly bank bonds, other industry groups are still relatively gloomy.
Experts say that the corporate bond market is still very difficult to recover, especially in restoring investor confidence and attracting investors back to the market. Therefore, bond credit ratings are expected to help issuers build confidence in the market and find suitable investors. More importantly, credit ratings can create investor confidence, especially when the market faces many obstacles or many negative factors.
Ms. Wendy Cheong - General Director and Head of Asia - Pacific, Moody's Investor Service: "As Vietnam's domestic bond market develops, credit ratings will play an increasingly important role by helping companies access new capital, build financing strategies, demonstrate transparency and maintain investor confidence."
Accordingly, credit rating activities help issuers communicate their credit story to the market without having to disclose information that is a business secret. A good credit rating report not only creates confidence for investors but also helps them increase their access to capital.
Basis for assessing the debt repayment capacity of enterprises
However, Decree 65/2022, applicable to privately issued corporate bonds, only regulates the credit rating of the issuing organization but does not regulate the rating of the bond lots.
According to the analysis of FiinRatings experts: “It is advisable to consider applying bond credit ratings instead of only requiring credit ratings for the issuer, because the product rating may be higher than the issuer rating in the case of a bond lot with payment guarantees. Bond credit ratings will also create a more favorable and effective investment environment for the group of institutional and foreign investors that the Draft Law on Securities Amendments is aiming for”.
Sharing the same view, Dr. Nguyen Tri Hieu - economic expert - said that this year, the corporate bond market is unlikely to recover, unless there are stricter regulations on bond issuance and the most important issue is that investors must regain confidence in the market. In the long term, the corporate bond market will certainly recover, but the credit rating of bonds needs to be regulated more strictly.
Dr. Nguyen Tri Hieu also proposed that all corporate bonds must be credit rated, so that investors have a basis to evaluate and assess the debt repayment capacity of issuers, not just credit rating for large bond issuances as prescribed by Decree 65. Doing this could restore investors' confidence in the market.
