Market Paradox and the Need for Reform
The corporate bond market is entering a crucial transitional phase, but it is also revealing many paradoxes. A recent in-depth report on the Vietnamese bond market published by VIS Rating shows that one of the biggest obstacles currently is the limited investor base.
Under current regulations, banks and insurance companies are not allowed to invest in bonds issued for refinancing purposes. This narrows the pool of potential investors, increases capital costs, and pushes refinancing bond interest rates in 2024-2025 up to 11-13%, significantly higher than bank lending rates. When the volume of maturing bonds peaks, the pressure to refinance becomes even more intense, putting many businesses in a difficult position. In response to this situation, in September 2025, the Ministry of Finance announced a roadmap for the development of investment funds for the period 2026-2030, which includes a proposal to remove this restriction. If approved, commercial banks and insurance companies will be able to participate more actively in the refinancing market, expanding the investor base and reducing funding costs for businesses.
However, the problems with bonds extend beyond just refinancing. Compared to bank loans, bond financing remains less competitive for long-term projects. This is due to the complex issuance mechanism: each fundraising stage requires separate documentation and approval, while issuing a single bond is restricted by regulations that only allow offerings within six months of the initial offering. This makes bonds an unsuitable option for projects spanning many years.
Another challenge arose in July 2024, when credit institutions were restricted in managing collateral for bonds. This is a crucial service aimed at bolstering investor confidence, but the tightening of regulations has reduced market capacity amidst increasing issuance demand. Furthermore, the market currently suffers from a supply-demand imbalance. Demand for fixed-income securities has surged, with assets under management (AUM) of funds quadrupling since 2023. However, the supply of high-quality bonds remains scarce. Institutional investors are particularly interested in sectors with stable cash flows such as infrastructure and utilities, but these sectors have a modest issuance history. Conversely, real estate – inherently risky – still accounts for a large proportion, creating a significant gap in portfolio diversification needs.
Unlocking new capital solutions for infrastructure and sustainable development.
Infrastructure development is considered the backbone of economic growth and is also the sector with the most stable and long-term capital needs. However, to attract this capital, the market needs a synchronized strategy that is both stable in policy and innovative in the design of financial instruments.
According to VIS Rating, policy consistency is key. Infrastructure projects have a 15-20 year lifespan, high leverage ratios, and depend on a single revenue source, making them highly vulnerable to policy fluctuations and construction risks. Therefore, establishing a clear legal framework for issuance, combined with post-issuance monitoring mechanisms – such as collateral management, escrow accounts, and transparent disbursement processes – will be fundamental to building confidence among long-term investors. Furthermore, ESG (Environmental, Social, and Governance) is becoming a mandatory "passport" for Vietnamese businesses to access international capital. Domestic investors may be flexible, but international organizations require strict and consistent compliance. Integrating ESG not only reduces capital costs but also improves the quality of issuance and the competitiveness of Vietnamese businesses in the global market. Another key solution is strengthening credibility. Credit guarantee activities – especially during the construction phase of infrastructure projects – are considered a crucial catalyst. International experience shows that full or partial payment guarantees from reputable organizations such as CGIF can significantly enhance the attractiveness of bonds. The successful transactions of Gelex (2019) and Phenikaa (2023) in issuing bonds guaranteed by international insurance companies have clearly demonstrated the effectiveness of this mechanism.
According to VIS Rating, the role of credit rating agencies is increasingly emphasized. Credit ratings provide independent assessments of financial structure and ESG compliance, helping investors quantify risks and make fair valuations, especially for new instruments such as green bonds and sustainable development bonds. In the context of Vietnam's market aiming for green growth, the participation of credit ratings will be a crucial lever to enhance transparency and attract international capital. For the capital market to truly have depth, the participation of institutional investors and development banks is indispensable. In countries in the region, a strong investor base – including pension funds, insurance companies, and development institutions such as ADB and IFC – has enabled PPP projects in the infrastructure sector to issue bonds with maturities of up to 50 years. Meanwhile, in Vietnam, the Social Insurance Fund and private pension funds are still not permitted to participate in the corporate bond market. Despite managing large assets, life insurance companies allocate less than 10% of their funds to this type of insurance.
A VIS Rating survey shows that legal and regulatory reforms (47%) and expanding the investor base (27%) are the top two priorities for the in-depth development of Vietnam's bond market. This is a clear consensus from the market community. If legal barriers are removed according to the Ministry of Finance's 2026–2027 roadmap, Vietnam could unlock a huge source of long-term capital, sufficient to finance the nation's ambitious infrastructure and economic development goals – VIS Rating noted.
Source: https://daibieunhandan.vn/khai-mo-dong-von-dai-han-cho-ha-tang-10388313.html
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