The paradox of investing in corporate bonds

Advice is only half the truth

Bringing money to the bank to deposit, many people are invited to buy corporate bonds with a commitment to profit, "huge" annual interest and the ability to add/withdraw money flexibly.

However, it is worth mentioning that many customers invest in corporate bonds but do not have a full understanding of this type of investment. In addition, many bank employees when consulting customers also use unclear language, even swapping concepts with flattering words about bonds.

As a result, many customers, despite pouring from hundreds of millions to billions of dong into corporate bonds, still do not know what financial product they are actually investing in.

In mid-March 2022, the State Bank announced that it had conducted surprise inspections of 11 banks that participated in bond investment. Although the identities of the 11 banks that were suddenly inspected as well as some violating units were not disclosed, one thing that can be confirmed is that in addition to issuing the most bonds in the market in recent times, banks are also active bond buyers of businesses in the market.

According to statistics from the State Bank, 17 out of 28 banks listed on the market by the end of 2022 were holding nearly VND188,000 billion in corporate bonds, down 13% compared to 2021.

Sharing with Nguoi Dua Tin , many individual investors said that banks are places that can provide transparent financial products, so they have a strong belief that buying bonds and insurance through banks will be more secure than buying directly from businesses.

That leads to many banks relying on customers' trust with ambiguous advice, making customers think that buying corporate bonds is also a form of bank savings.

Bond consulting with ambiguous information (illustrative photo).

Ms. Vu Huong (35 years old, Hanoi ) told about the time she brought money to deposit in a bank but was advised to buy bonds from Hai Phat Investment Joint Stock Company as a profitable investment product, with the same operation as savings and higher interest rates, especially being able to withdraw money whenever needed for use, just need to notify 1 month in advance.

Trusting the bank's reputation and not knowing much about bonds, Ms. Huong happily agreed to deposit several hundred million dong in the bank, thinking she had made a good investment.

Until early 2023, when the date for periodic bond interest payment came but the money was not in her account, Ms. Huong was shocked and went to the bank but received an unsatisfactory answer about the company's delay in paying the bond.

In addition, the bank proposed that she sign a contract agreeing to extend the above bond lot, but she did not agree because she was worried that she would lose both the lead and the net.

“Currently, the company does not have money to pay. If the investment period is extended, where will the company get the money to pay customers? I feel that the contract extension is not satisfactory, so I resolutely refuse to sign it. I am afraid that if the debt is extended, I will lose both principal and interest,” Ms. Huong shared.

When trust is misplaced…

Also a bond investor, Ms. Tran Quyen (32 years old, Hanoi) invested in bonds of a famous real estate company with the amount of 1.8 billion VND.

According to Ms. Quyen, during her Master's degree, she met and became close friends with a bond broker named Viet Anh. Later, when they understood each other's family background, Viet Anh introduced himself as working for the Capital Securities Joint Stock Company and that he currently had a very attractive bond investment rate.

Because she trusted her friend's recommendation, Ms. Quyen immediately poured 1.8 billion VND into bonds at the end of 2022.

“At that time, I did not understand what bonds were. It was simply introduced by a friend, and I had some idle money in hand. I trusted the introduction that this was just like a savings account but with a higher interest rate, and especially that it could be withdrawn very easily while still ensuring that the interest was kept the same, so I put down my money right away,” said Ms. Quyen.

Since then, the bond market has almost frozen, and many interest payment periods have passed. What Ms. Quyen has received is not an "extremely attractive" interest rate, but only the company's evasion of responsibility, the leadership's pushback, and conversations that have reached a deadlock.

Later, when asked for money, the broker named Viet Anh asked Ms. Quyen to sign a contract extension, but with unclear terms, she firmly refused. Immediately upon receiving Ms. Quyen's stubborn attitude, broker Viet Anh expressed his dissatisfaction and said Ms. Quyen was a... "fraud"!?

Similar to Ms. Quyen's case, Mr. Nguyen Quang (40 years old, Bac Giang ) also bought a similar bond product through Thu Do Securities introduced by broker Viet Anh. However, luckier than Ms. Quyen, Mr. Quang received several periodic interest payments.

But the joy was short-lived, starting from the end of 2022, Mr. Quang saw signs that the company was late in paying the bonds as per the signed contract. Along with the family needing money for personal purposes, Mr. Quang contacted the broker to stop this investment, requesting to withdraw the principal and interest.

However, in response to Mr. Quang were days of weary waiting, Capital Securities blamed the business for late payment and not agreeing to settle the bonds.

Meanwhile, the initial signed contract emphasized that if the issuer fails to pay the principal and interest of the bond on time, the securities company will guarantee and pay the entire investment.

After many unsuccessful attempts to work with brokers, Mr. Quang went to the headquarters to meet directly with the leaders of the Capital Securities but was only avoided. The leaders often said they were busy, said they were on a business trip, did not answer the phone, and showed no willingness to listen or show any desire to return the money to investors.

“The incident has lasted for many months, making me and my family extremely tired. My wife and I both bought bonds here with a total value of 2.8 billion VND, but now we feel like we have been cheated,” Quang shared.

“Bonds are now bombs!”

Decree 08 issued on March 5 was assessed by many experts as “reheating” the corporate bond market after a long period of “freezing”. According to Decree 08, there are regulations on the issue of bond issuers being allowed to exchange bonds for assets such as real estate and company projects if they receive the consent of bondholders.

Accordingly, since Decree 08 was issued, Ms. Quyen and Mr. Quang have received many messages and calls from brokers discussing the exchange of bonds for real estate products. However, this exchange also raises many problems.

Specifically, according to the broker T., with 1.8 billion VND in bonds in hand, Ms. Quyen can exchange for an original price apartment in a project located in Quy Nhon City of the bond issuer.

It seemed like a bargain, until after careful investigation, Ms. Quyen learned that the project had not yet begun construction. Currently, the project's planned construction site is still an empty lot, and everything like apartments or value is only on paper. And of course, the broker does not know exactly when the project will begin construction.

Upon learning the above information, Ms. Quyen expressed her desire to exchange the bond for another apartment also in Quy Nhon City, located in a project that is in the process of completion, expected to hand over the apartment next year, but was immediately refused by the broker.

The broker said that this apartment had been fully reserved, there were only a few apartments in bad corners left, and the value was from 2.5 to 3 billion VND. If Ms. Quyen wanted to exchange, she would have to pay the difference in cost, but even if she paid more, the broker emphasized that "it is very difficult to exchange bonds for this real estate product".

Investors are attracted by the many favorable terms of corporate bonds.

Not much different from Ms. Quyen, Mr. Quang also received many offers from brokers about exchanging 2.8 billion VND in bonds for an apartment in the suburbs of Hanoi.

However, the apartment is worth nearly 4 billion VND, so if he agrees to exchange the bonds, Mr. Quang will have to pay the difference of nearly 1 billion VND. When he visited the site, Mr. Quang said that the project was "shelved", the construction materials had been left outside for a long time and were rusty, and there were no workers.

When asked about the project's progress, Mr. Quang received a rather vague and roundabout answer from the broker and "sky-high" promises about the progress, so Mr. Quang refused to pay.

“I went to the project myself to see without telling the broker, and saw that the project was now in ruins, with furniture scattered and rusted like scrap metal. When I asked the surrounding residents, I received information that the project had been lying dormant for several months, perhaps because the investor ran out of money and the workers went on strike. I didn’t understand why I would exchange the bonds for a product that was equally risky, so I refused,” said Mr. Quang.

Not only Ms. Huong, Ms. Quyen, Mr. Quang but also many other bond investors are very confused because they do not know where their money goes, where it is coming from and as Mr. Quang jokingly said, "bonds have now turned into bombs!" .

Source: https://www.nguoiduatin.vn/trai-ngang-khi-dau-tu-trai-phieu-doanh-nghiep-a604591.html