HA NOI (VNS) — Viet Nam's government bond market saw robust development last year and experts expect it will continue to grow this year thanks to high demand from commercial banks.
According to Tran Van Dung, chairman and CEO of the Ha Noi Stock Exchange, G-bonds had continued to develop rapidly in the first quarter of this year on both primary and secondary markets.
As of March 15, the northern stock exchange has mobilised nearly VND43 trillion (US$2 billion) worth of G-bonds for the State budget. The transaction value of G-bonds on the secondary market reached VND69.8 trillion ($3.3 billion), about three times higher than the first three months of last year.
"I think demand from commercial banks for G-bonds will remain at a steady high in the near future, which could stem from positive macro-economic signals in the first two months as well as a soft increase in February inflation of just 1.32 per cent," Dung was quoted as saying by Lao Dong (Labour) newspaper.
He said that bank liquidity was abundant at the moment due to growing deposits, while credit growth was unlikely to rise in the short term. In addition, the number of G- bonds maturing this year was rather large, creating a pool of capital for financial institutions to finance their investments.
"Because deposit interest rates are likely to fall in the near future, G-bonds are drawing interest from commercial banks," he explained.
According to the report "Asia Bond Monitor" by the Asia Development Bank in March 2013, Viet Nam's local currency bond market saw the most rapid growth among emerging East Asian nations, growing 42.7 per cent on a year-on-year basis in the last quarter of 2012.
The growth of the country's bond market was entirely driven by the G-bond market which saw a 54.6 per cent increase year-on-year while its corporate bond market shrank 47.6 per year during the same period.
Of the total $25 billion raised in the forth quarter last year, $24 billion came from G-bonds while corporate bonds were worth just $1 billion.
"New issuance in Viet Nam's corporate sector remained constrained by a combination of high interest rates and investor concerns about corporate sector credit quality as Vietnamese banks have become more cautious about extending new credit," the report said.
The rapid growth of the Vietnamese market has been attributed to the fact that it is one of the smallest markets in the region and thus has great potential for future growth and development.
At the same time, Viet Nam's bond market is drawing higher participation of foreign investors thanks to its improved economic situation.
According to 2012 statistics from the H Noi Stock Exchange, the value of winning bids by foreign investors in the primary market last year accounted for more than 10 per cent of the total market value. On the secondary market, foreign trading also made up over 29 per cent of total transaction value. — VNS