Positive signal

The corporate bond market has shown more positive signs recently. Enterprises have returned to issuing bonds. If in the first quarter there were almost no issuances, from the second quarter onwards, the issuance volume each month was higher than the previous month. By the end of November, 77 enterprises had issued bonds with a volume of about VND220,000 billion.

This is the assessment and conclusion of Mr. Nguyen Hoang Duong, Deputy Director of the Department of Finance of Banks and Financial Institutions ( Ministry of Finance ) at the Seminar "Promoting the development of an effective, safe and sustainable corporate bond market" organized by the Government Electronic Information Portal on the afternoon of December 4.

Economist Dr. Can Van Luc also said that the corporate bond market is recovering. The issuance volume in November was 15 times higher than the same period last year. In the past 5 months, the value was 5 times higher than in the first 6 months of the year.

According to Mr. Nguyen Hoang Duong, since the incidents in the financial market in October 2022, along with the negative developments in the domestic and foreign financial markets, the corporate bond market has been severely affected, investors have lost confidence, businesses are under pressure to buy back issued bonds as well as not being able to issue new bonds to mobilize capital for production and business.

In that context, the Government and the Prime Minister have given many strong directions in areas related to this market, from perfecting the legal framework to maintaining macroeconomic stability, improving the production and business environment as well as markets related to the bond market such as the real estate market, the credit market, and implementing the State's supportive fiscal policies.

Among those policies, the Government promptly and promptly issued Decree 08, including the policy of postponing the implementation of some provisions of Decree 65 as well as the policy allowing businesses and investors to have mechanisms to negotiate, extend, postpone and exchange issued bonds in the spirit of sharing risks and harmonizing benefits between the parties. After the Government issued Decree 08, the market showed more positive signs as mentioned above.

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The corporate bond market shows signs of recovery. (Photo: DT)

According to Ms. Nguyen Ngoc Anh, General Director of SSI Fund Management Company, contrary to concerns about the bond run, the market is now considered to have had a "soft landing", mainly thanks to Decree 08 and the launch of a centralized individual corporate bond exchange.

Dr. Can Van Luc also highly appreciated Decree 08. Accordingly, this is an unprecedented policy decision and brings high efficiency, especially the mechanism for extending and deferring bond debt and the mechanism for money-goods swap (converting corporate bonds to real estate).

Besides, the market is also supported by policies to remove difficulties for real estate and increase bank money injection into the economy.

According to Mr. Nguyen Hoang Duong, based on the provisions of Decree 08, throughout the past year, businesses and bond investors have made great efforts to negotiate the payment of maturing bonds. The rate of successful negotiations has increased sharply. In addition, businesses that have arranged financial resources have proactively bought back bonds before maturity.

Mr. Nguyen Anh Phong, General Director of Hanoi Stock Exchange (HNX), said that the centralized trading system for individual corporate bonds has achieved remarkable results. On July 19, the first trading day, HNX had 19 bonds of 3 participating enterprises registered for trading; to date, 760 bonds of more than 200 enterprises have registered. Thus, about 2/3 of enterprises as well as bonds in the market have been registered on this centralized trading system.

Important capital mobilization channel, corporate bonds likely to increase sharply in 2024

With recent positive signals, Ms. Nguyen Ngoc Anh believes that the corporate bond market can grow strongly in 2024.

In fact, the corporate bond market plays a very important role and position in the economy, being an effective medium and long-term capital mobilization channel for the sustainable development of enterprises; at the same time, it contributes to diversifying the financial market, ensuring harmony and balance in the capital market structure, reducing excessive dependence on bank credit channels...

The development of the corporate bond market is also to implement the Party and State's policy to gradually develop a balance between the capital market and the bank credit market.

In the coming time, when enterprises need a large amount of capital to expand production and business activities after the economy recovers, the corporate bond channel will become even more important.

However, for corporate bonds to grow strongly again, the market needs to regain investor confidence. Decree 08 in fact only helps businesses have more time to deal with the immediate difficulties related to bonds. Many of the deferral regulations under Decree 08 are about to expire, the corporate bond market will have to return to comply with Decree 65.

According to Mr. Luc, re-implementing Decree 65 is necessary but there needs to be a roadmap, especially regarding credit rating.

Currently, there are only 3 credit rating companies in the market and issuers have not yet formed a culture of using credit rating services.

In addition, according to Mr. Luc, it is necessary to diversify products in the corporate bond market. Currently, the market still lacks green bonds, construction bonds, social bonds, sustainable bonds, etc.

The market also needs to diversify its investor base, especially institutional investors and investment funds. It is also necessary to improve information and data infrastructure. Furthermore, it is necessary to simplify the procedures for public issuance and strengthen inspection and supervision.

Ms. Ngoc Anh believes that a separate trading channel should be built for institutional investors in a more open way to support businesses. Corporate bonds can also be sold to individuals (primary and secondary) but the information needs to be clearer and more transparent.

According to the Ministry of Finance, as of the end of October 2023, outstanding individual corporate bonds were about 1 million billion VND, accounting for 10.5% of GDP in 2022.

Although the corporate bond market has recently shown positive signs, difficulties remain. Corporate bond interest rates remain high, with many recently issued lots reaching 14% per year, 2-3 times higher than the average interest rate on bank deposits. These are mostly real estate businesses, or those related to real estate. The banking group issues bonds at lower interest rates, averaging around 7% per year.

Corporate bonds increase by hundreds of thousands of billions, Ministry of Finance recommends In the first 10 months of the year, 70 enterprises issued corporate bonds with a volume of 180.4 trillion VND. The volume of early repurchase was 190.7 trillion VND.