Disappearance of manufacturing corporate bonds

Corporate bond issuance will increase sharply in 2024, but mainly in the banking group, while manufacturing corporate bonds will disappear. Non-bank bonds are expected to accelerate again in 2025.

The sadness of non-bank bonds

As of the information announcement date of January 3, 2025, the total value of corporate bond issuance in 2024 reached VND 445,000 billion, an increase of nearly 30% compared to 2023. This is the strongest increase after the peak year of 2020-2021, before the "Tan Hoang Minh bomb" exploded, destroying the corporate bond market.

However, in terms of industry structure, corporate bonds in 2024 are still a concern, as the issuance structure is increasingly skewed towards the banking group with a proportion of up to 68.3%. Although the market grew by nearly 30%, the banking group alone increased by 55%, real estate increased by 15%, while many industry groups declined. In particular, corporate bonds in the manufacturing industry almost disappeared from the market, while in 2023 they accounted for a proportion of up to 8%.

In other words, although the TPDN channel in 2024 successfully mobilized nearly half a million billion VND for the economy , it was still mainly banks. Meanwhile, non-bank enterprises, including manufacturing, service and real estate enterprises, mobilized limited funds.

Mr. Ngo Thanh Huan, CEO of FIDT Investment Consulting and Asset Management Joint Stock Company, said: “Corporate bonds in the manufacturing and service sectors, including real estate corporate bonds, are still low due to the economic recession. We have underestimated the impact of the economic recession and the decline in economic demand. When demand decreases, businesses do not need capital. This is the main reason why corporate bonds issued in 2024 are mainly bank bonds, while non-bank corporate bonds recover slowly.”

Mr. Nguyen Quang Thuan, General Director of FiinRatings, expects that corporate bond issuance by non-financial enterprises in 2025 will be more vibrant, thanks to legal solutions in the fields of real estate, energy, infrastructure, etc.

Specifically, capital demand will increase from a number of key sectors such as industrial park real estate (following the growth of foreign investment capital), residential real estate (thanks to improvements in the process of resolving project legal issues) and especially the renewable energy sector (thanks to the drastic restoration of the implementation process of Power Plan VIII to cope with the risk of power shortage in 2026). In addition, consumer credit demand may improve as the economy enters a new growth phase...

However, the barriers and difficulties facing the corporate bond market are still very large. According to Dr. Le Xuan Nghia, an economic expert, the corporate bond market clearly reflects the structure of the Vietnamese economy. GDP growth in Vietnam is high, but it is largely based on exports (mainly in the hands of foreign-invested enterprises). Meanwhile, domestic enterprises only contribute a very small part to exports and are mainly enterprises in the agriculture, forestry and fishery sectors.

The total value of corporate bonds in circulation as of December 31, 2024 is VND 1.26 million billion, accounting for 11.2% of GDP in 2024. The target of outstanding corporate bond market reaching at least 20% of GDP in 2025 and 25% in 2030 is quite challenging. Currently, the rate of late payment of corporate bonds is still high and the pressure on maturity is still high.

In addition, the growth momentum of GDP also comes from investment, but like exports, Vietnam's investment sector also comes mainly from foreign-invested enterprises. The retail sector is also in a similar situation.

“Manufacturing enterprises are weak, the economy relies on foreign investment enterprises, real estate enterprises and banks. This is the reason why corporate bonds issued on the market are mainly bank bonds and partly real estate bonds, while manufacturing corporate bonds are almost non-existent,” Dr. Le Xuan Nghia analyzed.

According to this expert, many manufacturing enterprises are seriously lacking capital, but cannot participate in the bond market due to high interest rates, short issuance terms, and increasingly strict issuance conditions. Therefore, banks are increasingly "alone" in the corporate bond market and the economy is increasingly dependent on credit.

Waiting for the "new wind" called green bonds

In addition to expectations for a recovery in non-bank bonds, in 2025, experts also expect a breakthrough in green bonds.

According to FiinRatings, there are 18 green bond issuances for the 2018-2023 period, and in the first 11 months of 2024 alone, the market has recorded 4 green bond transactions issued with a total value of VND 6,870 billion, with confirmation of meeting international green standards. Some bond issuances are rated by FiinRatings and confirmed to meet international green standards.

Mr. Nguyen Quang Thuan expects that the corporate bond market will witness stronger development of green bonds due to the requirements of institutional investors and the willingness of businesses, as well as the completion of the legal framework.

According to FiinRatings, the total value of green bond issuance has only reached about VND6,870 billion, accounting for 2% of total non-bank bonds issued since the beginning of 2024.

“We expect that the Green Bond and Green Credit Classification Framework will soon be issued by the Government in 2025, in order to create a foundation for sustainable financial development in Vietnam, as well as attract green capital to Vietnamese enterprises. Currently, the issuance of green bonds is mainly based on the principle of voluntariness and in accordance with international standards,” said Mr. Thuan.

Promoting the issuance of green bonds will help improve the quality of goods in the corporate bond market and attract better capital from domestic and international investors. According to the Securities Law (amended), from 2026, individual professional securities investors will be "squeezed" when participating in corporate bond investment.

Experts also expect that in 2025, appropriate policies will be introduced to attract institutional investors, especially foreign investors, to make up for the upcoming shortage of individual investors. Allowing financial institutions to participate more deeply in corporate bonds based on the risk-based investment management framework (Risk-Base Capital) and "relaxing" regulations on corporate bond investment for credit institutions, insurance companies, etc. will stimulate capital flows into this market.

Source: https://baodautu.vn/mat-hut-trai-phieu-doanh-nghiep-san-xuat-d238977.html