The local bond market has grown double in size over the past five years,said Do Ngoc Quynh, Secretary of the Vietnam Bond Market Association(VBMA).
Recording an average annual growth rate of 30 percent, itwas the highest growth recorded in East Asia and ASEAN regions, Quynhtold a local newspaper. He added that the growth of the bond market was a"bright spot" in the overall picture of Vietnam's financial markets.
Thetotal value of the bonds in circulation at the end of 2014 wasapproximately 760 trillion VND (equivalent to 38 billion USD and 19.3percent of the GDP), including 700 trillion VND (32.8 billion USD) fromthe government bonds (G-bonds).
The volume of corporate bondsissued successfully also increased over the years. In 2014, it was worthapproximately 40 trillion VND (1.87 billion USD), up 30 percent from2010.
Quynh pointed out that the restructuring of the economy has supported the bond market growth in Vietnam.
However,the secretary also saw limitations of the market, adding that its scale(19.3 percent of the GDP) was still much lower than the target of 38percent of the GDP, set for 2020. The terms of G-bonds were also shorterthan the target. Most of the best-selling terms were of five years andbelow, while the government wanted to sell more bonds with longer termssuch as 10 and 15 years.
In addition, with the capitalisation ofapproximately 38 billion USD, the local bond market was still smallerthan in the other countries in the region, including the Philippineswith 102 billion USD (equivalent to 37.6 percent of the GDP) andThailand with 282 billion USD (76.3 percent of the GDP).
The sizeof local government bonds was also smaller than the two remainingcomponents of the financial system, credit institutions (100 percent ofthe GDP) and market shares (31.5 percent of the GDP).
Quynhthought the problems could be solved by implementing measures to improvethe quality of the market and develop more products to attract moreinvestors.
The country should also improve the legal frameworkfor the issuance and investment of corporate bonds. Quynh said that, inparticular, the government should amend the local decree to reduce theprocedures for bond issuance to encourage more participation in themarket.
At the same time, they should also offer incentives andreduce fees and procedures to attract investors, especially foreigninvestors to the local bond market.-VNA