Support for corporate bonds
The corporate bond market in Vietnam is facing many challenges, with hundreds of thousands of billions of VND worth of bonds maturing within the next year, most of which are real estate bonds with tens of thousands of billions of bonds at risk of late principal repayment. However, there are still grounds to expect that the bond market will change more positively in the coming time.
According to FiinRatings, factors such as improved credit growth, favorable macro, and more stringent bond credit ratings regulations are the driving forces that help the corporate bond market become more active.
Credit growth is expected to improve in the final months of the year. Outstanding credit balance at the end of September 2024 increased by 8.53% compared to the beginning of the year, with credit recovering mainly thanks to the corporate customer segment.
On the macro side, after a period of slow growth in 2023, thanks to loose monetary policy and low interest rates as well as favorable global economic environment, businesses are expected to grow again, which is also the basis for a more vibrant bond market. New laws such as the Land Law, Real Estate Business Law, Housing Law, and Credit Institutions Law coming into effect are expected to provide additional policy support for businesses.
In the market, the trend of raising capital through sustainable bonds and green bonds is becoming more and more evident. Finding financial resources for conversion is the top priority of issuers when government policies promote capital flows into renewable energy, nuclear, low-emission materials and carbon capture. Therefore, the green bond and sustainable bond market is an inevitable trend of the economy.
New opportunities for the market
At the end of October, at the National Assembly session, Deputy Prime Minister and Minister of Finance Ho Duc Phoc presented a draft Law amending and supplementing a number of articles of the Securities Law, the Accounting Law, the Independent Audit Law, the State Budget Law, the Law on Management and Use of Public Assets, the Tax Administration Law and the National Reserve Law (project 1 law amending 7 laws).
Notably, the draft submitted to the National Assembly has removed the proposal that individual professional investors are not allowed to buy individual bonds. Instead, it stipulates that individual investors are allowed to buy, sell, trade, and transfer individual bonds when the issuing enterprise has a credit rating, collateral, and bank guarantee. The draft law also requires individual professional investors to ensure conditions on investment participation time and transaction frequency. In addition, foreign organizations and individuals are also considered professional securities investors.
Experts assess that new legal regulations have opened up new opportunities for the corporate bond market.
Regarding bond credit ratings, Dr. Nguyen Tri Hieu - an economic expert - said that strict regulations on bond issuance and bond credit ratings are an opportunity for the corporate bond market to recover and the most important issue is to help investors regain confidence in this investment channel.
Mr. Nguyen Quang Thuan - General Director of FiinRatings - said: "The regulation to add professional securities investors including foreign institutional and individual investors is a reasonable policy, aiming to encourage foreign investors to participate in the Vietnamese capital market. Because the potential for market expansion from foreign investors is huge."
“Foreign investors often have investment experience, qualifications, financial capacity and high risk tolerance. Foreign investment funds have much larger resources and scale than domestic organizations. Therefore, with the huge potential of Vietnam’s debt capital market, encouraging foreign investors to participate in the market is necessary,” said the General Director of FiinRatings.
