Critical for Vietnam to develop efficient corporate bond market

Webinar on developing cooperate bond effectively and sustainably (Photo: Vietnamplus)

In the first quarter of 2022, the corporate bond market showed signs of stagnation with the total number of bonds mobilized by the companies reaching only 57.6 trillion VND on both individual issuance and public channels. As a result, the issue value decreased by about 45% compared to December 2021.

This information was provided at the forum on “Development of efficient and sustainable corporate bond market," organized by the Journal of Corporate Forum in Hanoi on May 19.

Bottlenecks identification

Speaking at the forum, Hoang Quang Phong, Vice President of the Vietnam Chamber of Commerce and Industry (VCCI), said that the bond market has "cooled down" because of a number of new policies. These include the Circular 16/2021/TTNHNN effective from 15/01/2022 with stricter regulations for credit institutions in the sale of corporate bonds.

In addition, cases related to legal violations on the capital market and risks of the corporate bond market in the past are creating "bottlenecks" in the market.

According to Phong, Vietnam's economy is in a period of recovery with GDP growth in Q1 exceeding 5 percent. However, the growth target of 6-6.5% will be a big challenge, as the business community is facing many difficulties. Among others are the rising fuel prices and difficulties in accessing credit channels.

In addition, interest rates are showing an upward trend, while the financial-monetary support packages are difficult to access. This is especially the case with the support package to offset interest rates as it has yet to be implemented.

Therefore, the leader of VCCI said that it is necessary to have corporate bonds with good indicators in the leading role for a healthy market. These come from proper bond market solutions to promote effective and sustainable development of the market. What follows will contribute to the development of the business community as well as the growth of the economy and the global financial integration.

Sharing a similar view was Dr. Can Van Luc, a member of the National Monetary and Financial Policy Advisory Council. He emphasized that the channel for raising capital through the bond market is extremely important for the long-term capital flow of enterprises. Thus, it is necessary to build infrastructure to regulate the corporate bond market in a healthy way.

“The problem is that the corporate bond market has developed relatively “hot” in the past years, so there should be a solution to throttle it back. In the first four months of the year, the size of corporate bond issuance decreased, especially corporate bonds issued by real estate enterprises. Those have declined sharply compared to the same period last year. This shows that the market is now under strict control” Luc said.

Strengthening investor confidence

Pointing out some shortcomings, Hoang Quang Phong admitted that the bond market and the capital market in general and the legal corridor have not been completed and the market infrastructure lacks synchronization.

Therefore, the policy guidelines should be towards strict, transparent and effective market management, but this will make it difficult to avoid short-term impacts on the market.

Can Van Luc said the development of the corporate bond market requires more thorough legal regulations.

According to Luc, the quality of corporate bonds is at risk if individual volumes of issuances account for the majority (about 94.5%) of them. Moreover, the main collateral assets are those such as real estate (formed in the future), shares (unlisted), and arising property rights.

On the other hand, the capacity and reputation of the issuers have yet to be ensured. This may lead to enforcement against the financial statements and business prospectuses coupled with an insufficient level of publicity and transparency.

To create a healthy market, Can Van Luc proposed that management authorities should have policy mechanisms that both create and control risks in the market. In the immediate future, the authorities need to resolve all past cases to strengthen investor confidence and avoid bad precedents./.