New bond issuance will recover, and the market will become tighter.

234 trillion VND worth of bonds will mature in 2024.

The private corporate bond market witnessed a slight recovery in 2023 with new issuances reaching VND 345.8 trillion, an increase of 8.6% year-on-year. Corporate bonds issued to the public, in particular, saw exceptional growth, reaching VND 37 trillion, a 74.6% increase.

In 2024, FiinRatings estimates the value of maturing corporate bonds to reach VND 234 trillion, a 6.47% increase year-on-year. Of this, the real estate sector accounts for over 41% of the maturing value, followed by credit institutions at 22.2%. Compared to 2023, the market will face additional burdens from previously extended bonds with overdue principal/interest payments under Decree 08, estimated at VND 99.7 trillion requiring resolution.

“The payment pressure on real estate businesses is expected to be difficult to alleviate as the market has not fully recovered, legal obstacles persist due to policy delays, and businesses need time to rebalance their operating cash flow. The risk of late payments will also increase due to the expiration of some extension provisions in Decree 08 and pressure from bond issuances with repurchase commitments in 2024,” said an expert from FiinRatings.

FiinRatings expects the corporate bond market in 2024 to enter a new, more rigorous phase of development with the application of higher requirements for all market participants, thereby helping new bond issuance activities gradually recover. Many regulations in Decree 65/2022/ND-CP, which will come into effect in 2024, will establish stricter discipline for all stakeholders and support the restoration of market confidence. The large issuance demand from the banking sector to supplement capital and meet financial safety indicators will drive the bond market in 2024.

Implementing Decree 65 requires a roadmap to create a developing market.

According to Dr. Can Van Luc, Chief Economist of BIDV , the application of Decree No. 65/2022/ND-CP is necessary, but it requires a roadmap and balance to continue fostering market development.

Decree 08/2023/ND-CP amends three conditions, among which the 60-day offering period remains unaffected. However, the most important condition is that the professional investor condition needs a more specific timeframe, including whether or not it can be extended, and how. If we want a healthy market that targets knowledgeable, experienced, and well-informed buyers, then the conditions and terms for professional investors as stipulated in Decree No. 65 should continue to be applied.

Furthermore, regulations regarding credit rating for businesses issuing bonds should have a more appropriate roadmap. Currently, there are only three organizations nationwide that rate the creditworthiness of bond-issuing businesses, and more importantly, the culture and habits of issuers purchasing credit rating services have not yet been established.

Therefore, Dr. Can Van Luc believes that an appropriate roadmap for regulating credit ratings needs to be considered, and in particular, it is necessary to categorize groups according to which groups need credit ratings and which do not. For example, commercial banks do not need credit ratings because their issuance purpose is clearly to increase Tier 2 capital, and secondly, their safety ratios are strictly managed by the State.

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