The realty sector records a strong rise in the value of corporate bonds issued in the first six months of 2021 (Illustrative photo: VNA) In the second quarter of 2021, the total valueof corporate bonds issued reached 164 trillion VND (7.15 billion USD), 3.7times higher than the previous quarter and up 29 percent over the same periodin 2020, according to the corporate bond market report published recently bythe Center for Analysis and Investment Advisory of SSI Securities Joint StockCompany (SSI Research).
Of the estimate, the value of bonds issued byreal estate enterprises was 64.4 trillion VND, accounting for 44.4 percent ofthe total issued value, an increase of 131 percent compared to the previousquarter and an increase of 285 percent over the same period in 2020.
The issuers with the largest amounts of bondswere Golden Hill, BIM Group, Hung Thinh Quy Nhon and Wonderland. Besidesdomestic issuance, a number of businesses also issued international bonds, suchas BIM Group issuing 200 million USD with an interest rate of 7.4 percent peryear.
In the first two quarters of 2021, real estatebusinesses issued the largest amount of bonds with the issuance value of up to 92.3trillion VND, with an average interest rate of 10.36 percent per year, 23percentage points lower than the 2020 average.
“The main fuel of the bond market in the realestate sector is that bond interest rates are much higher than deposit rates atbanks, as well as current restrictions on access to bank capital," saidthe report by SSI Research.
A reporter from tinnhanhchungkhoan.vn, posingas an individual investor, tried to buy bonds in a group on Facebook, with anexpected investment of several hundred million Vietnamese dong, he receiveddozens of messages thereafter.
Decree No 153/2020/ND-CP on private bondoffering and trading, effective from January 1, 2021, stipulates that buyers ofprivately issued bonds must be professional investors. But in fact, brokeragescan still commit a breach of this regulation if customers insist.
Huong Nguyen, a financial consultant working ata securities company, told tinnhanhchungkhoan.vn her company was ready tosupport customers in the procedures and conditions to possess a certificate asa professional investor if that buyer wishes to directly sign the bond purchasecontract.
Huong said that the bonds provided by thecompany have many terms for customers to choose from, particularly 3-6-9-12-15months, with interest rates amounting to 10 percent per year, significantlyhigher than the interest rates offered by banks for deposits.
“Lower bank interest rates and current volatilestock market are attributed to investors more frequently shifting to otherinvestment channels such as corporate bonds,” said Nguyen Anh Trung, DeputyGeneral Director of the Hai Phong Securities Company.
“The outbreak of the COVID-19 pandemic,however, is damaging the production and business activities of enterprises,affecting their ability to pay interest for bonds.
“Recently there are businesses in the field ofbeauty, car repair and maintenance, karaoke and restaurants, which arenon-essential services and businesses easily affected by the disease, regularlyinviting individual investors to buy corporate bonds with unbelievably highinterest rates of 18 percent per year for an investment of only 1 billion VND,”he said.
In the latest warning, the Ministry of Financesaid that investors buying bonds need to clearly distinguish between the twomethods of issuing corporate bonds to the public, and issuing corporate bondsprivately.
Increased risk
SSI Research forecast in its report that riskswith corporate bonds are increasing, especially in the real estate and energysectors.
According to SSI Research, of the bonds issuedin the first half of 2021, 18.6 percent are secured by real estate, 11 percentare secured by assets, 33 percent are partially secured by assets, real estateand shares, 9.3 percent fully secured by shares and 28 percent unsecured.
More specifically, the report stated that thereis 29 trillion VND of real estate bonds fully secured by stocks or withoutcollateral. If including real estate bonds partially secured by shares, thisfigure reaches nearly 60 trillion VND, accounting for 64 percent of the totalamount of real estate bonds issued in the first six months of 2021.
The obligation to pay the bond interests byshares is meaningless because when a crisis occurs, the enterprise becomesinsolvent, the value of shares used as collateral also drops dramatically, SSIsaid./.
VNA
