Illustrative image (Photo: VNA) This would involve improving legal regulations and encouragingcompanies to issue bonds to the public. The disclosure requirements should befurther standardised and the issuance approval procedures should be simplified.
According to analysts from FiinRatings, the information disclosurefor bond offerings should be improved by including additional assessmentinformation regarding debt servicing capacity instead of the current emphasison prospectuses of bonds offered in the market. Additionally, publicly offeredbonds should be independently credit-rated following the practices of moredeveloped bond markets in the region.
In particular, as proposed by analysts from FiinRatings, forpublicly issued bonds by listed companies with high credit ratings, regulatoryauthorities may consider applying expedited approval or deemed approvalmethods. Alongside this, maintaining post-approval supervision mechanisms tolimit violations is important.
Regarding private placements, the target audience of professionalindividual investors has been narrowed down according to the new regulations inDecree 65. However, if bonds are only privately offered to institutionalinvestors, including banks, investment funds, insurance companies, pensionfunds and licensed entities, simplifying procedures for bondholderrepresentation mechanisms should be considered.
Attracting institutional investors
In addition to simplifying issuance regulations, experts also saidthat a comprehensive solution is needed to remove legal barriers and developinvestor bases.
Most bond-issuing companies in recent times have chosen privateplacements with commercial banks and professional individual investors as themain investors. Organisational entities such as insurance companies and bondinvestment funds have limited participation.
Meanwhile, in recent times, after unfavourable developments in themarket, many commercial banks have gradually restricted investments incorporate bonds according to the regulations of the State Bank of Vietnam (SBV)to control credit risks and ensure system safety.
Insurance companies are also restricted from investing incorporate bonds for the purpose of debt restructuring under the new InsuranceBusiness Law, which came into effect at the beginning of 2024.
The report from FiinRatings indicates that the corporate bondmarket has experienced a significant decline due to violations in the marketand changes in the regulations for private placements.
To develop the corporate bond market as an importantcapital-raising channel for businesses, alongside credit, Vietnam needs toconsider evaluating and revising regulations to align with internationalstandards for medium and long-term financing.
The involvement of financial institutions, such as retirementfunds, investment funds and government-managed investor groups like the SocialInsurance of Vietnam and the State Capital Investment Corporation (SCIC), isalso crucial. These models have been successful internationally and can beconsidered for adoption in Vietnam.
According to FiinRatings, as of February 5, 2024, the corporatebond market recorded four issuance transactions with a total value of 6.45trillion VND from four companies. The outlook for the corporate bond market in2024 is expected to be more vibrant than in 2023, with disciplined and tightermarket development, along with recovering confidence.
Moody's forecasts that the Vietnamese corporate bond market willdevelop in a more disciplined and controlled manner in 2024, with continuedrecovery and increased confidence.
SaigonRatings suggests that the bond market has bottomed out andis showing signs of recovery due to positive factors such as clear signs ofglobal economic recovery, stable economic growth, increased investment demandand renewed investor confidence.
In 2024, real estate companies in particular will need to raisecapital for land acquisition and project development. Bonds remain one of thepreferred channels for funding, although careful planning is crucial for manycompanies considering bond issuances.
The corporate bond market in Vietnam is expected to undergopositive developments in 2024, driven by regulatory improvements, increasedinvestor participation, and favourable economic conditions./.
VNA
