Illustrative image (Photo: VNA) Hanoi (VNS/VNA) - Bond issuance isbecoming a popular channel for firms to raise capital for its efficiency andconvenience.
In the first six months of 2019, listed companieson the Ho Chi Minh Stock Exchange (HOSE) raised more than 19 trillion VND (812million USD) via share issuance, up 17.2 percent compared to 2018.
But this only met part of the capital demand asboth listed and unlisted firms had to mobilise a total of 90 trillion VNDthrough bond issuance in the first six months, up 34 percent compared to thesame period last year.
Most of enterprises approved to list on the stockmarket wish to raise capital from share issuance to reduce the dependence onbank loans, but in fact they seem to still find it hard to mobilise long-termcapital.
An Phat Securities Joint Stock Company (APG) in2019 plans to increase its chartered capital from more than 340 billion VND to 1trillion VND. Under the initial plan, the company will issue shares to pay 2018dividends and issue shares to the public to raise capital.
However, prior to the general shareholders'meeting in 2019, the board of directors added a plan to issue 100 billion VND ofbonds in case the share issuance plan fails.
Statistics from the HOSE show that the amount ofcapital businesses listed on the bourse mobilised via share issuance in thefirst six months of 2019 recorded strong growth but still quite low in absolutevalue.
In 2017, listed companies on HOSE raised more than28 trillion VND through issuing shares. This figure plummeted to 16.5 trillion VNDin 2018 and rose to 19.3 trillion VND in the first half of 2019.
In 2018, the capital enterprises raise fromissuing both shares and bonds increased by 35.4 percent compared to 2017,reaching 64.9 trillion VND. However, this figure is small compared to thecredit/GDP ratio of 2018 of 134 percent.
The proportion of capital supply from the capitalmarket to the economy this year increased significantly compared to 2017, butstood at only 14 percent, which means that businesses still rely heavily onbank loans.
Notably, banks seem to prefer to purchasecorporate bond for its flexible investment opportunities.
According to a deputy general director of a listedbank, commercial banks were key investors in the corporate bond market. Banksprefer to invest in corporate bonds because they can earn good profit with bondinterest rate of 12-13 percent per year.
This trend is expected to continue in the futureas businesses will switch to the bond channel to call for capital from banks.
Businesses selling bonds to banks are similar toborrowing money from them, he said.
But compared to borrowing from banks, raisingcapital through bonds has some advantages such as no collateral is needed andfirms can use the money without bank supervision.
“The majority of bond issuances are mostly privateplacement, with easier conditions and more simple documents compared to issuingshares, make it more convenient for businesses to quickly have capital,” hesaid.
Bond interest rate now stands at 13-14 percent peryear, therefore strongly attracts individual investors.
But according to the deputy general director, theenterprises will spend the mobilised money on their own wishes while sometimesnot following the guidelines adopted by the general meeting of shareholders.
The process of using capital is less transparent,affecting the confidence of investors, he said.-VNS/VNA
VNA
