Vietnam’s bond market valued at 52.9 billion USD in Q2

Hanoi (VNA) – The value of Vietnam’s bond market continued to grow in the second quarter of 2019, by 2.6 percent from Q1, to 52.9 billion USD, including 48 billion USD worth of Government bonds and 5 billion USD worth of corporate bonds.

According to the Asia Bond Monitor report released by the Asian Development Bank (ADB) in September, the Vietnamese government bond market rose 3.2 percent from the previous quarter to 48 billion USD. Meanwhile, the corporate bond market fell 3.4 percent to 5 billion USD.

Vietnam’s total bond issuance amounted to 23.2 billion USD in Q2 of 2019, up 295.1 percent quarter-on-quarter from a low base in the previous quarter, thus registering the highest growth rate in emerging East Asia during the reviewed period.

The growth was driven solely by a rebound in central bank issuance as the State Bank of Vietnam resumed the issuance of bills in March after a five-month break. Central bank bond issuances accounted for 94 percent of the country’s total issuance during the quarter. Issuance rose 123.8 percent year on year in Q2 of 2019, reversing the 72.2 percent year-on-year contraction in Q1, the ADB said.

It added Vietnam accounted for the smallest share of G3 currency bond issuance in emerging East Asia at 0.1 percent, all of which was issued in US dollars. Vietnam Prosperity Bank was the sole issuer with a 0.3 billion USD, 3-year bond with a coupon rate of 6.25 percent. The issuance was from the bank’s Eurobond medium-term note program, with proceeds to be used for meeting the bank’s capital and regulatory needs.

[Corporate bond issuance up 222 percent in Q1]

The report noted local currency bond markets in emerging East Asia expanded steadily during Q2 of 2019 despite ongoing trade conflicts, an economic slowdown in China, and moderating global growth.

“Foreign investment in emerging East Asia remains stable but there are still considerable potential risks. Financial stability in the region could be undermined if global investors change their views on emerging markets,” ADB Chief Economist Yasuyuki Sawada said, adding that: “Governments in the region would do well to continue to deepen local currency bond markets so they can act as a reliable local source of funding.”

Emerging East Asia comprises China, Hong Kong (China), Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

The report said local currency bonds outstanding in emerging East Asia totalled 15.3 trillion USD at the end of June, up 3.5 percent from the end of March this year and 14.2 percent higher than the end of June 2018. Bond issuance in emerging East Asia totalled 1.6 trillion USD in the second quarter, 12.2 percent higher than in the first quarter due to strong issuance of government bonds and a recovery in corporate bonds issuance.

At the end of June, there were 9.4 trillion USD in local currency government bonds outstanding, 13.6 percent higher than at the end of June 2018. The stock of corporate bonds was 5.8 trillion USD, up 15 percent compared with the same period last year.

China remained the largest bond market in emerging East Asia, accounting for 75.3 percent of the region’s total outstanding paper. In the country, the stock of local government bonds expanded 5.4 percent on a quarter-on-quarter basis, the fastest of any bond category in China, following directives for local governments to accelerate the issuance and use of special bonds to support economic growth and finance infrastructure and other development projects. At the end of June, China’s debt-to-gross domestic product ratio was 84.6 percent versus 78.8 percent at the end of June 2018.

The Asia Bond Monitor includes three discussion boxes that focus on the impact of US monetary policy uncertainty in emerging market currencies; the importance of domestic capital markets as a source of financing for corporates in emerging markets; and the challenges faced by financial markets on the use of other benchmark interest rates as they transition away from the widely used London Interbank Offered Rate, or LIBOR./.