Illustrative image (Source: internet) Hanoi (VNS/VNA) -Privately-placed corporate bonds can no longer be sold within their first yearof issuance, according to a new decree.
The decree amends several points of Decree No 163/2018/ND-CP datedDecember 4, 2018, about corporate bond issuance with new regulationstightened trading of privately-placed corporate bonds in the domestic market.
According to experts, small-sized enterprises have been issuingcorporate bonds in large volumes, creating potential risks for bothissuing businesses and investors.
Under Decree No 163, privately-placed corporate bonds were issued to lessthan 100 investors excluding professional securities investors.However, as trading time was not limited, it created a loopholewhich allowed companies to issue bonds to less than 100 investors who could sellthe bonds freely on the secondary market to more investors.
The new decree, which will take effect on September 1, aims to better managethe corporate bond market which has seen rapid development in recent years andposed significant risks to investors.
According to the new decree, depository organisations must provide informationabout corporate bond trading within one working day of the trading beingcompleted. Regular updates about bond registration and depository must beprovided to the stock exchange monthly, quarterly and yearly.
The new decree also means violations of private corporate bond issuance will behandled in compliance with regulations about handling administrative violationsin securities, securities market and other relevant regulations.
The Ministry of Finance said tightened regulations about corporate bondissuance aimed to protect investors and ensure safety for the bond market.
Recently, the ministry warned about the overheated development of the corporatebond market, urging investors to be cautious and to invest only when theythoroughly understand the issuing company. The ministry also saidinvestors should not buy corporate bonds without studying possible risks.
The finance ministry’s statistics showed outstanding corporate bonds expandedrapidly, from 6.29 percent of the country’s gross domestic product (GDP) in2017 to 9 percent of GDP in 2018 and about 11 percent in 2019 (worth around 640trillion VND or 27.58 billion USD).
Vietnam has targeted that the corporate bond market size would be equivalent to7 percent of GDP by the end of this year.
In the first four months of this year, enterprises raised about 58 trillion VNDfrom issuing bonds, around half issued by real estate companies hungry forcapital while credit policies for the property sector were tightened. Somecompanies even offered very high yields, about 1.5 percentage points higherthan the common rate in the market./.
VNA
