Corporate bond issuance declines in the first six months

August 30, 2022 - 08:34


An investor holds corporate bonds. Photo

HÀ NỘI — Corporate bond issuances took a dive in the first half of 2022 amid lower bond interest rates.

According to MB Securities, over VNĐ183.5 trillion (US$7.8 billion) of corporate bonds were issued in the first six months of the year, down 10 per cent year-on-year. Of which, just VNĐ5.3 trillion went to investors through public offerings. 

The second quarter saw VNĐ112.8 trillion of corporate bonds offered to the financial market, also 10 per cent lower than the same period last year.

Six-month weighted average maturity (WAM) was 3.2 years, roughly 0.69 years less than the figure in 2021. Average bond interest rates stayed at 6.4 per cent, around 1.7 percentage points short of last year's number.

Among the largest issuers, the banking sector took the lead with a total six-month issue of VNĐ90.1 trillion and a WAM of 3.76 years. Of which, banks offered VNĐ80.7 trillion worth of bonds in Q2 alone.

The realty sector came next with about VNĐ10.8 trillion in Q2. The figure paled in comparison with its total issues in early 2022, which hit VNĐ44.5 trillion and had a WAM of 2.45 years.

Other sectors made up VNĐ48.8 trillion of the total corporate bond on sale in the first half of 2022. Notably, construction firms offered VNĐ17 trillion with a WAM of 2.27 years.

FinnPro's data showed that about VNĐ2.8 trillion of corporate bonds were issued in the first half of August and the banking sector remained the largest issuer.

Vietcombank took the biggest share of the pie with VNĐ1.5 trillion, followed by Agribank with VNĐ600 billion and ACB with VNĐ300 billion.

VietinBank and VietCapital Bank also got in on the act with VNĐ50 billion and VNĐ60 billion, respectively.

Most issuers employed private placement to raise bond money since public offerings require high costs and high standards. For that reason, the latter involves banks only.

Financial expert Nguyễn Trí Hiếu underscored capital expansion as the main reason for banks to issue such large volumes of bonds.

Banks had to raise the proceeds, he believed, to consolidate their financial ratios and deepen financial buffers amid a period of mounting credits that outpace their equity.

Another reason for banks overwhelming the bond market is that loan restructuring specified by Circulars No 01, No 03 and No 14 has caused some cash flows to not return to banks in the short term.

Banks had no other choice but to issue bonds to make up for the late-returned cash flows.

The State Securities Commission has recently announced that issuers, which are not public companies, will issue privately-placed bonds under the guidance of the Law on Enterprise and Decree No 153.

That means they are held responsible for their own issuances and no pre-issue registrations, approvals or official notifications are required.

The commission also stressed that only professional investors are eligible to purchase privately-placed bonds and the investors take responsibility for their own investing decisions.  —VNS