In 2023, the issuance of corporate bonds showed moderate optimism but was primarily dominated by the banking sector. Photo baotintuc.vn

HÀ NỘI — The corporate bond market is expected to remain relatively sluggish until the end of the first quarter of 2024, as conditions for issuing and trading corporate bonds tighten.

No corporate bond issuances have been reported as of January 24, according to data from the Hà Nội Stock Exchange (HNX) and the State Securities Commission (SSC). However, there has been consistent activity in the repurchase of bonds before maturity, with companies buying back nearly VNĐ4.3 trillion (US$17.5 million) worth of bonds.

Currently, few companies are disclosing their plans to issue corporate bonds in 2024, except for some banks such as Vietcombank and VietCapital Bank.

Experts predict that the corporate bond market this year will follow a similar pattern to the previous year, characterised by a slow start in the first half and stronger growth in the second half. 

Business operations continue to face challenges, the real estate market remains subdued and investor confidence has yet to fully recover. These factors contribute to the trend of the corporate bond market.

Furthermore, the reintroduction of Decree 65/2022/NĐ-CP from the beginning of 2024, after a period of suspension and postponement under Decree 08/2023/NĐ-CP, is also an obstacle for the market.

In the long term, the implementation of Decree 65 would contribute to a more transparent and professional corporate bond market, Cấn Văn Lực, a member of the National Financial and Monetary Policy Advisory Council, told baodautu.vn. However, in the short term, this would create certain pressures for issuing companies.

Currently, bank savings interest rates are very low, and many retail investors are interested in returning to the corporate bond investment channel but facing difficulties in meeting the requirements of Decree 65.

According to the decree, retail investors who want to participate in the corporate bond market must hold a securities portfolio with a minimum market value of VNĐ2 billion, determined based on the average market value of the portfolio over the previous 180 consecutive days before being recognised as a professional securities investor.

Previously, retail investors were the primary growth driver of the corporate bond market, accounting for one-third of the market's purchasing power. However, a decrease in confidence following the Tân Hoàng Minh incident and stricter regulations on professional retail investors have led to a significant decline in the number of retail investors participating in the corporate bond market. 

Last year, retail investors only represented around 6.8 per cent of the total value of corporate bond transactions.

Nguyễn Bá Khương, an analyst at VNDirect Securities Corporation, said that the tighter regulations imposed by Decree 65 would impact the private placement of corporate bonds in 2024. 

It might take until the end of this year for the release activity to recover as market participants gradually become accustomed to the new regulations. Additionally, the capital needs of businesses are expected to increase as production and business activities rebound, further contributing to the recovery of the corporate bond market.

Institutional investors attraction

According to the Vietnam Bond Market Association, in 2024, the total value of maturity bonds is nearly VNĐ279 trillion, with 41 per cent of the bond value belonging to the real estate sector and 20 per cent from the banking sector. However, the burden of maturing corporate bonds is weighing heavily on businesses, while the market remains challenging.

So far, the Ministry of Finance has not provided any information regarding whether Decree 08 issued by the Government, which amends, supplements, and suspends the implementation of certain provisions on the issuance and trading of private placement of bonds in the domestic market and the issuance of corporate bonds to the international market, will be extended or not.

Lê Hoàng Châu, Chairman of the HCM City Real Estate Association, has proposed that the government extend the application of the regulations for determining the status of individual professional securities investors in Decree 08/2023/ND-CP by an additional 12 months (until the end of 2024). This is aimed at gradually improving the corporate bond market and aligning it with international standards.

Meanwhile, many experts support the idea of tightening regulations for retail investors while also implementing measures to attract more institutional investors to participate in the corporate bond market.

Nguyễn Ngọc Anh, CEO of SSI Asset Management Company, believes that it is necessary to tightly regulate the private placement of corporate bonds due to the inherent risks involved. 

However, there is a need to establish a separate trading channel for institutional investors and investment funds to enhance market liquidity. Currently, there are limitations in place regarding mechanisms to attract domestic investment funds to participate.

Investment funds also noted that the corporate bond market has faced its most challenging phase and that there are still obstacles ahead, particularly with the real estate market remaining subdued. 

In 2023, the issuance of corporate bonds showed moderate optimism but was primarily dominated by the banking sector. There were fewer non-financial businesses issuing bonds, while real estate companies primarily utilised corporate bonds to restructure their debts. — VNS