The bond market offers a yet-to-be-tapped channel for luring foreign investment, said participants at the Vietnam Finance and Capital Markets Conference held on Nov. 30 in Hanoi.

Current bond market capitalisation has not yet reached 50 percent of national GDP, a figure far below regional markets and one which suggests an enormous developing possibility.

Do Ngoc Quynh from the Vietnam Bond Market Association said that the global economic crisis has seen foreign investors withdraw capital from the nation’s capital markets and negatively influenced market liquidity.

This has been reflected in recent, unsuccessful Government bond auctions, Quynh said, but he predicted that the situation will turn around as the economy recovers.

“When the economy stabilises, the development of the bond market is necessary for the purpose of mid- and long-term capital mobilisation,” he said.

Nguyen Ngoc Anh from the Ministry of Finance added,” We are receiving big support from foreign financial institutions like the World Bank and IFC in strengthening the bond market.”

The establishment of a dedicated bond market under the auspices of the Hanoi Stock Exchange has also increased the transparency of the market.

In other discussions during Nov. 30’s conference, Dragon Capital Group co-founder Dominic Scriven said that recent State Bank of Vietnam moves on interest rate and foreign exchange policies are the right thing to do, solidifying investor confidence in the banking system.

Scriven called the progress made in earning customer trust over the past 15 years the biggest accomplishment of domestic commercial banks.

Central bank innovations in monetary system administration, allowing domestic commercial banks to standardise their activities within the global market, are also seen as a success, said An Binh Bank deputy director Pham Quoc Thanh.

The establishment of foreign banks on the local market has also created a more competitive environment for domestic commercial banks, spurring them to event greater performance, Thanh said.

In 2008, the nation’s commercial banks had to comply with regulations that require charter capital of at least 1 trillion VND. “And by 2010, they are required to raise the regulated charter capital to 3 trillion VND,” said Le Dac Cu, Director of the Banking Business Department under the Vietnam Banking Association./.