Vietnam’s Government bond market needs to be made more appealing.(Photo: tapchitaichinh.vn) Hanoi (VNA) – Vietnam’s Governmentbond market needs to be made more appealing, as recent years have seen a lackof foreign participation.
In the first five month of 2018, foreignersbought 1.5 trillion VND (65.9 million USD) worth of Government bonds in theprimary market and 3 trillion VND (131.85 million USD) in the secondary market.The figures were 20.8 trillion VND (914.16 million USD) and 12.6 trillion VND(553.77 million), respectively in 2016, and 10.3 trillion VND and 20.5 trillionVND in 2017.
In 2017, bond transactions involving theforeign sector accounted for less than 5.1 percent of the total value issued inthe primary market. The figure was 6.1 percent in the secondary market.
However, a positive change was recorded inthe rate of foreign ownership in the Government bond market, which increasedfrom 4.5 percent in 2015 to 5 percent in 2017.
In 2016 and 2017, the Finance Ministry forthe first time successfully issued approximately 11.5 trillion VND (507.72million USD) worth of 20-year and 30-year government bonds forfully-foreign-funded investors. The move reflected a demand for long-terminvestment from the sector.
According to Nguyen Thi Hoang Lan, DeputyDirector of the Hanoi Stock Exchange (HNX), macroeconomic indicators are whatforeign investors consider when they decide to pour their money into a nation.
That’s why Vietnam needs a stable andconsistent macroeconomic policy, particularly in public debt management, sheadded.
Lan noted the Government should also offerinvestors instruments to prevent foreign exchange risks. The State Bank ofVietnam has allowed currency forward contracts, but their subjects do notinclude non-residents.
A currency forward locks in the exchangerate for the purchase or sale of a currency on a future date, and does notinvolve any upfront payment from the parties involved.
Macroeconomic policy on exchange rate andinvestment capital management, tax structure and stability in taxation are otherfactors when it comes to boosting foreign investment in Government bonds, Lansaid.
She highlighted that the simplification andstandardisation following international criteria of administrative procedures isalso necessary.
Lean procedures facilitate both Governmentmanagement and capital flow, thus increasing the competitiveness of the market,Lan said.
Infrastructure solutions and technicalsolutions that impact bond supply and demand should be taken intoconsideration, she added.
Head of the Finance Ministry’sFinance-Banking Department Phan Thi Thu Hien said to encourage foreigninvestment, the ministry is working to complete the legal framework for Governmentbond issuance with simplified procedures and better transaction fees.
To fulfill its goal, the ministry hasstepped up cooperation with the World Bank and Asian Development Bank, shesaid.-VNA
VNA
