Corporate bond market cools for 2nd month

Hanoi (VNS/VNA) - The value of corporate bonds issued in October was 9.5 trillion VND (409 million USD), down 12.8 percent from September, according to the Hanoi Stock Exchange (HNX).

Compared to August, the figure was down 84 percent.

Creditors remained the biggest issuers as the value of their sold bonds was 3.7 trillion VND, accounting for nearly 39 percent of the total figure.

Real estate firms ranked second with 3.07 trillion VND worth of corporate bonds sold to investors in September, which accounted for 32.3 percent of the total.

Services and construction companies issued 226 billion VND and 300 billion VND worth of bonds in September, respectively.

Their figures accounted for 2.4 percent and 3.2 percent of the market’s total, respectively.

In October, 20 companies organised 90 bond auctions. The average term of the bonds was 5.47 years.

Bonds sold by lenders had the highest average annual yield rate of 6.08 percent, followed by construction companies (5.33 percent), property developers (4.61 percent), and services suppliers (2.69 percent).

The northern market regulator said that the market continued cooling down in October since Decree 81/2020/NĐ-CP took effect on September 1 to tighten the corporate bond market in order to protect investors that are vulnerable to risks and make the market more transparent.

According to the HCM City Real Estate Association (HoREA), outstanding loans for real estate companies in HCM City increased by 5.9 percent in 10 months to 293.8 trillion VND in October.

The figure was equal to 12 percent of the total outstanding loans for all sectors in the southern hub city, which rose 5.5 percent in 10 months to 2.42 quadrillion VND in October.

About 2.7 percent of outstanding loans for real estate projects were considered bad debts, according to HoREA.

The Vietnamese economy continued progressing in the first nine months at a pace of 2.12 percent, inflation was controlled well and the consumer price index (CPI) rose only 3.71 percent.

Those factors mean the bad-debt ratio in the real estate sector remains under control, HoREA said.

“But a large amount of loans made to real estate firms, including bond purchases by both institutional and individual investors, may turn to non-performing loans,” the association warned.

The regulators should pay attention to consumer lending, especially when some people borrow money to buy properties instead of building and repairing their houses as contracted, HoREA said.

Those loans may account for 1.7 percent of the total real estate loans and such loans require stricter supervision from the authorities, the association added.

Property developers made big bond issuances in January-August but the sector cooled down in September and October due to Decree 81/2020/NĐ-CP.

It should be noted that the number of individual investors accounts for 20 percent of all investors while bond purchases by banking institutions occupy a majority of the total figure, HoREA said.

Those underline potential risks for investors, issuers and financial companies when the bonds come to maturity, the association said.

There needs to be an independent rating agency to evaluate the bond issuers, thus making the market more transparent and better protecting the investors, HoREA said./.