Attracting foreign capital into corporate bonds.

The amended Securities Law, which will take effect from the beginning of 2025, is expected to "pave the way" for attracting foreign capital flows into the corporate bond market.

The amended Securities Law, which will take effect from the beginning of 2025, is expected to "pave the way" for attracting foreign capital flows into the corporate bond market.

A piece of the pie with potential

The amended Securities Law, recently passed at the eighth session of the 15th National Assembly , has added a provision stating that "foreign organizations and individuals are also considered professional securities investors." This provision paves the way for foreign investors to participate in investing capital in the Vietnamese corporate bond market.

According to the National Assembly's Finance and Budget Committee, the above regulation will increase the attractiveness of the stock market to foreign investors and promote it as a channel for foreign indirect investment into Vietnam.

Mr. Nguyen Khac Hai, Director of the Legal and Compliance Control Division at SSI Securities Corporation, also believes that attracting more foreign investors to diversify the customer base participating in the corporate bond market is essential. According to Mr. Hai, more specific guidelines are needed to facilitate the participation of foreign investors in this market.

Currently, foreign investors only hold about 3% of domestic corporate bonds. However, according to analysts, with the completion of the legal framework, the prospects for attracting foreign capital into this market are very high. "The potential for market expansion from foreign investors is enormous, due to their experience, financial strength, and high risk tolerance," FiinRatings' analysis team stated.

However, Mr. Nguyen Quang Thuan, General Director of Fiin Ratings, pointed out that most funds worth hundreds of billions of USD investing in emerging markets like Vietnam choose the investment trust model. However, Vietnam lacks professional financial institutions and investment management funds. Therefore, Mr. Thuan believes that domestic investment funds need to be promoted.

Furthermore, to attract investors to the corporate bond market, in addition to continuing to standardize information transparency, diversifying products, and implementing credit rating activities, it is necessary to establish a legal framework for bond underwriting companies and build a soft foundation (yield curve, default history, etc.).

Several open-ended funds have reported receiving numerous offers to participate in Vietnam's corporate bond market, but after further investigation, they are hesitant due to the limited number of rated corporate bonds. Additionally, the lack of data on corporate bonds, particularly on the probability of default, makes it difficult for foreign investors to manage the risks of their investments.

Market liquidity will become more active.

In addition to "paving the way" for greater foreign participation in the corporate bond market, the amended Securities Law also stipulates stricter regulations on the participants in the private corporate bond market. Accordingly, individual professional securities investors are only allowed to buy, sell, and trade private corporate bonds in two cases: the issuing company has a credit rating and collateral; and the issuing company has a credit rating and a payment guarantee from a credit institution.

We need to develop institutional investors.

- Mr. Nguyen Quang Thuan, General Director of Fiin Ratings

Currently, institutional investment institutions, including investment funds, insurance companies, and voluntary pension funds, own less than 10% of the value of outstanding bonds. Therefore, regulations need to be amended to encourage the growth of institutional investors.

Specifically, financial institutions should be allowed to participate more deeply in the corporate bond market based on a risk-based capital management framework. In addition, efforts should be directed towards applying risk-based asset allocation to insurance companies, credit institutions, and other similar organizations.

Mr. Nguyen Khac Hai believes that these regulations will help alleviate the concerns of investors in this market. The changes will "pave the way" for investors to return to the market, stimulating the inherent vibrancy of this capital mobilization channel.

Meanwhile, Mr. Ngo Thanh Huan, CEO of FIDT, believes that the regulation will not affect market liquidity. The reason is that after the "incidents" in the corporate bond market over the past two years, the number of "fake" professional individual investors has decreased. In the long run, this regulation will lead to a healthier and more genuine development of the corporate bond market.

Although positively assessing the impact of the amended Securities Law on the corporate bond market, economist Dr. Le Xuan Nghia believes that the challenges facing the market remain significant. To address the current difficulties, the first step is to resolve the large-scale real estate projects currently stalled in various provinces and cities. Furthermore, solutions are needed to attract more foreign and institutional investors to participate in the corporate bond market.

Source: https://baodautu.vn/hut-von-ngoai-vao-trai-phieu-doanh-nghiep-d232144.html