High inflation and bond yields lower than banks interest rates, as wellas the decreasing value of the Vietnamese dong against the US dollar,have combined to derail recent Government bond issues, said Vietnam BondMarket Association vice chairman Trinh Hoai Giang.
Vietnam 's bond market has great potential, but economic instability isrestraining its development, negatively affecting both investors andGovernment plans to raise capital, said Giang.
In March,three Government bond auctions worth a total of 15 trillion VND (717.7million USD) were conducted, but just 314 billion VND (15 million USD)worth of bonds were sold. All were sold at a 10-year term with aninterest rate of 11.5 percent per year – the ceiling rate for Governmentbonds set by the Ministry of Finance during the last 18 months.
Having completed 40 percent of its bond sales target in the first twomonths of this year, the Ministry of Finance was unwilling to offerbonds at a higher ceiling rate, and investors balked.
Meanwhile, trading in the secondary bond market is also expected tocontinue dreary, according to a recent forecast by Bao Viet SecuritiesCo.
Analysts said low liquidity was one of the factorsdiscouraging foreign investors from participating in Vietnam 's bondmarket. During the global financial crisis in 2008, foreign investorshad great difficulties selling Vietnamese bonds and were forced todiscount them in order to withdraw money from the market.
Economist Vu Dinh Anh said the worsening trade deficit and highinflation, interest and exchange rates, particularly the loss in valueof the dong, had continued to drive foreign investors away. Thesefactors had reduced the competitiveness of Vietnam 's bond market inattracting foreign investors compared to those of other countries, Anhsaid.
In March, foreign investors were absent from mostbond auctions on the primary market, while their trading on thesecondary market accounted for only 7 percent of total market value. In2010, their participation averaged 28 percent.
VietnamBond Market Association general secretary Do Ngoc Quynh said foreigninvestors remained concerned over economic factors, yield rates, creditratings, the scale of market development, business costs, and thenation's incomplete infrastructure and legal systems.
Thevalue of the domestic bond market equaled just over 15 percent ofnational GDP last year, compared to 51.4 percent on average in otherEast Asian countries, Quynh said. To further develop the market, theGovernment should develop a comprehensive plan with specific targets forthe bond market, Quynh added./.
Vietnam 's bond market has great potential, but economic instability isrestraining its development, negatively affecting both investors andGovernment plans to raise capital, said Giang.
In March,three Government bond auctions worth a total of 15 trillion VND (717.7million USD) were conducted, but just 314 billion VND (15 million USD)worth of bonds were sold. All were sold at a 10-year term with aninterest rate of 11.5 percent per year – the ceiling rate for Governmentbonds set by the Ministry of Finance during the last 18 months.
Having completed 40 percent of its bond sales target in the first twomonths of this year, the Ministry of Finance was unwilling to offerbonds at a higher ceiling rate, and investors balked.
Meanwhile, trading in the secondary bond market is also expected tocontinue dreary, according to a recent forecast by Bao Viet SecuritiesCo.
Analysts said low liquidity was one of the factorsdiscouraging foreign investors from participating in Vietnam 's bondmarket. During the global financial crisis in 2008, foreign investorshad great difficulties selling Vietnamese bonds and were forced todiscount them in order to withdraw money from the market.
Economist Vu Dinh Anh said the worsening trade deficit and highinflation, interest and exchange rates, particularly the loss in valueof the dong, had continued to drive foreign investors away. Thesefactors had reduced the competitiveness of Vietnam 's bond market inattracting foreign investors compared to those of other countries, Anhsaid.
In March, foreign investors were absent from mostbond auctions on the primary market, while their trading on thesecondary market accounted for only 7 percent of total market value. In2010, their participation averaged 28 percent.
VietnamBond Market Association general secretary Do Ngoc Quynh said foreigninvestors remained concerned over economic factors, yield rates, creditratings, the scale of market development, business costs, and thenation's incomplete infrastructure and legal systems.
Thevalue of the domestic bond market equaled just over 15 percent ofnational GDP last year, compared to 51.4 percent on average in otherEast Asian countries, Quynh said. To further develop the market, theGovernment should develop a comprehensive plan with specific targets forthe bond market, Quynh added./.
