Large bond investment funds' NAV hit three-year low

Hanoi (VNS/VNA) - The Vietnamese financial market has experienced a bumpy road since the beginning of 2022 due to violations in the issuance and trading of corporate bonds by large corporations such as Tan Hoang Minh and Van Thinh Phat.

The confidence of investors is at such a low level that many are willing to sell corporate bonds at any cost to collect money at a high discount.

According to cafef.vn, most bonds are trading below par value by 4-5%, and with an addition of a 10-12% yield, it means sellers accept a 14-17% discount. Investors are even willing to sell fund certificates.

The sudden, large-scale withdrawal from funds has also caused the net asset value (NAV) of open-ended bond funds to decline deeply. According to estimates at ten large bond funds, the total NAV is now only about 13.5 trillion VND, the lowest in recent years and down 6.2 trillion VND compared to the end of October. The figure even dipped by 12.3 trillion VND compared to the beginning of this year.

In the previous two years, 2020 and 2021, open-ended bond funds attracted a large number of investors because of their flexible investment mechanism, which was suitable for those with small investments. At the peak of this period, which was from June to October 2021, the total NAV of the ten large open-ended bond funds regularly stayed around the threshold of 28-30 trillion VND. However, movements from the beginning of the year reversed that trend.

The NAV of open-ended bond funds began to plunge after the scandal of Tan Hoang Minh and only recovered slightly between May and September. The trend suddenly reversed in October, causing the total NAV of the funds to plummet below 19.7 trillion VND at the end of last month.

The fall was mainly driven by the strong net withdrawal of investors while the mobilised value was very low, with many open-ended funds barely able to raise new money during the period.

Most open-ended bond funds’ size has shrunk since early November, but to varying degrees. TCBF still leads in terms of size, with a NAV of about 10.7 trillion VND, but it has fallen sharply from more than 16 trillion VND at the end of last month.

Compared to the peak recorded at the end of June 2021, the size of TCBF has decreased by about 16 trillion VND, equivalent to 60%. MBBond and SSIBF also saw significant slides in size, down 39% and 22%, respectively, compared to the end of October.

Moreover, the race to increase savings interest rates also affected the activities of open-ended bond funds. Although savings interest rates are not as attractive as those of bond fund certificates, bank deposits are still basically a safer channel, especially amid the many unpredictable fluctuations in the market.

However, it should be noted that bond funds have professional investment teams and hold the bonds of leading enterprises in many fields. The investment activities of these funds are also diversified, with risk assessment and management complying with professional standards.

Therefore, investors should not panic and carefully consider the quality of the bond portfolio held by the investment funds before making a decision, avoiding withdrawal at all costs to protect their own interests./.