Standardise bond market to ensure growth of stock and realty market

July 18, 2022 - 11:03
Corporate bonds are the market's participants' biggest concern at the moment.

A bank employee counting money at its office. — Photo

Ly Ly Cao

HÀ NỘI — The bond market has become an important capital mobilisation channel for enterprises, especially real estate firms. However recent scandals have caused uncertainty, threatening the development of public companies, the Vietnamese stock market and the realty industry.

At the event on “Inflation, Interest rates and Securities”, expert Cấn Văn Lực, member of the National Financial and Monetary Policy Advisory Council, said that the bond market and debt repayment pressure are now the stock market’s biggest risks.

The amount of corporate bonds due in 2022 is about VNĐ230 trillion (US$9.8 billion), in 2023 is about VNĐ220 trillion, and in 2024 is also about VNĐ220 trillion.

As enterprises accelerated to issue 3-4 year bonds in the last 2-3 years, a huge amount of bonds are set to mature within the next two years, he added.

Therefore, if the bond market slows down, many companies will default.

“So surely the Government will soon have to issue the amended Decree 153” on the trading of privately placed corporate bonds on the domestic market and selling corporate bonds on the international market, Lực added.

The amended decree is expected to tighten some regulations on issuing bonds.

In the first six months of the year, the total of issued corporate bonds was just over VNĐ130 billion. Notably, no corporate bonds were issued in April, while in May, it was about VNĐ60 trillion of which VNĐ8-9 trillion worth of bonds was released by real estate companies.

In June, according to the latest provisional statistics, about VNĐ30 trillion bonds were issued, of which VNĐ25 trillion came from banks then only the remaining VNĐ5 trillion from public enterprises.

Expert Võ Trí Thành, another member of the National Financial and Monetary Policy Advisory Council, said that the market’s concerns at the moment are debt repayment and how to find appropriate ways to treat the bond market but not disrupt enterprises’ cash flows.

The total value of corporate bonds is equal to government bonds of VNĐ1.5 quadrillion, about 17-18 per cent of GDP. Of which nearly a third is released by banks to raise second-tier capital, while corporate bonds are also nearly a third, which is VNĐ500 trillion and are mainly issued in the last 3-4 years.

In 2021 alone, over VNĐ700 trillion worth of bonds were released, mainly from three sectors - commercial banks, real estate and energy, said Thành.

Thereby, the Government has to carry out measures that not only make sure the bond market does not slow down, but also guarantee retail investors’ rights.

In the corporate bond’s structure, about VNĐ300 trillion is from individual investors, including both professionals and non-specialists, Thành added.

Similarly, expert Lê Xuân Nghĩa stressed the crucial role of corporate bonds in the financial system.

“The growth rate of corporate bonds in a year is 35 per cent. In two years it doubled. Now it's worth VNĐ1.5 quadrillion, by 2024 it's VNĐ3 quadrillion. In 2026 it is VNĐ6 quadrillion, and in 2028, it is VNĐ12 quadrillion.

“It can completely replace the medium and long-term credit of banks, so that the commercial banking system can return to serve financial needs,” Nghĩa said.

If the bond market were to default, the realty market would have been frozen, he said, adding that many listed real estate companies would tumble, causing the stock market to face uncertainty.

Fortunately, the country’s stock market has three big advantages, the economist emphasised.

Firstly, the T+2 settlement cycle will be applied in August, enhancing efficiency and reducing risk.

Secondly, as the stock market is expected to be upgraded later this year or next year, the total capitalisation is likely to increase by 14-15 per cent, Nghĩa said.

Last but not least, the Vietnamese economy basically escapes from the risks of global inflation and recession, attracting foreign investors to return to the market. — VNS