Billion-dollar debt trading "market": Foreign investors begin to join the game

Currently, information on bad debts is provided clearly and transparently by credit institutions and VAMC. Photo: Duc Thanh

Why is the billion dollar market sluggish?

In the recently issued Official Dispatch No. 22/CD-TTg, the Prime Minister requested to encourage foreign banks to participate in the process of handling bad debts, restructuring weak credit institutions and promoting investment in Vietnam.

In fact, the Vietnamese bad debt market has an attractive enough scale in the eyes of foreign investors (according to data from the State Bank of Vietnam, the total outstanding bad debt of the whole industry is at over VND 227,000 billion, or nearly USD 9 billion). Recently, many foreign investors such as OK Debt Trading Company Limited, Welcome Debt Trading Company Limited, Korea Asset Management Company (KAMCO) ... have been interested in exploring investment opportunities in the debt trading market in Vietnam.

However, at present, debt trading is still taking place between the Vietnam Asset Management Company (VAMC), the Vietnam Debt Trading Company Limited (DATC) and debt trading companies under domestic commercial banks (AMC). Attracting foreign investors to participate in the bad debt "market" has been proposed very early, but has not been implemented effectively.

Dr. Nguyen Quoc Hung, General Secretary of the Vietnam Banking Association, said that there are many reasons why the debt trading market has not yet developed. That is, there are not many participants in the market (credit institutions still mainly sell debt to VAMC and DATC).

In addition, credit institutions have difficulty in determining whether the debts that credit institutions buy from organizations/individuals with the function of trading and buying debts (not credit institutions) can apply Resolution 42/2017/QH14 to handle debts and handle secured assets or not? Tools and services to support the debt trading market are still lacking and weak. The registration of changes to the secured party after credit institutions sell bad debts is facing many difficulties, causing risks for investors.

The leader of a bank’s debt trading company said that currently, information about bad debt is basically transparent and complete. The main reason why the “market” cannot develop is that the legal corridor does not ensure safety for investors and is not attractive to foreign investors.

Foreign investors begin to participate in the bad debt market

Dr. Nguyen Tri Hieu said that the experience of successfully handling bad debt in other countries is to have a proper debt trading market and to attract foreign capital to participate in this market. Currently, the scale of bad debt in Vietnam is enough to create an attractive debt trading market for international investors, unfortunately the legal corridor has not been able to attract investors.

Vietnam needs to build a favorable legal corridor to attract foreign investors to participate in the debt trading market. This will not only increase liquidity, but also reduce the pressure on banks to handle debt. Providing transparent information on collateral and bad debts helps the market operate effectively and increases investor confidence.

- Mr. Nguyen Quang Huy, CEO of Faculty of Finance - Banking, Nguyen Trai University

Currently, the VAMC Debt Exchange has developed a relatively diverse database, connected with many investors, and provided consulting services to investors, including foreign investors. Mr. Vu Ngoc Minh, Director of the VAMC Debt Exchange, said that since its establishment, the Exchange has invited foreign investors to participate. Investors are given maximum conditions to learn about the source of goods.

“Recently, Korean and Chinese investors have been very interested in Vietnam’s debt trading market. We have introduced a very large portfolio to Korean investors, they have considered and are conducting transactions to buy several large debts,” said Mr. Minh.

Recently, through KAMCO, many Korean investors have expressed their interest in the Vietnamese bad debt market. Previously, KAMCO requested VAMC to provide a list of borrowers and collateral so that Korean investors can study and access within the framework of Vietnamese law.

It is known that Korean investors are particularly interested in unfinished real estate projects , chains of companies with potential production and business activities, but facing temporary difficulties in capital flows... Through debt purchase, Korean investors can increase their presence in the real estate market and some other industries in Vietnam.

In addition to Korean investors, Chinese and ASEAN investors are also particularly interested in Vietnam's bad debt market. Collectius Group - a partner providing restructuring and bad debt trading services in Asia with headquarters in many countries, including Vietnam - is actively promoting its operations in Vietnam. The Group's representative said that in Vietnam, Collectius has served more than 195,000 customers through many bad debt trading transactions and is negotiating with many different financial institutions to diversify its investment portfolio.

According to the leader of a debt trading company, although foreign investors are very interested in the Vietnamese bad debt market, information about bad debts provided by credit institutions and VAMC is clear and transparent, successful transactions depend on many factors, especially the legal framework. Therefore, the legalization of Resolution No. 42/2017/QH14 of the National Assembly on piloting the handling of bad debts of credit institutions will greatly support the development of the debt market and attract foreign investors.

Source: https://baodautu.vn/cho-mua-ban-no-ty-usd-nha-dau-tu-ngoai-bat-dau-nhap-cuoc-d252284.html