Dec 17, 2018 / 11:43

High growing corporate bond market is priority for Vietnam: Expert

The Hanoitimes - Vietnam’s corporate bond market is expected to boom in the near future, taking into account high liquidity and growth rate of the bond market, as well as favorable legal framework.

Vietnam’s enterprises rely heavily on credit loans from banks, but as the number and scale of enterprises on the stock market are growing rapidly, the country requires a high growing corporate bond market, according to economist Chau Dinh Linh. 
The high demand for long-term assets investment from other economies and the upcoming Decree 163, which stipulates the relaxation of issuance conditions to help enterprises raise capital through the bond issuance, making the bond market an urgent priority, Linh was quoted as saying by newswire CafeF.

As of September 2018, total value of bond issuance in the corporate bond market reached VND79.51 trillion (US$3.42 billion), up 83% compared to the same period of 2015 at VND43.5 trillion (US$1.87 billion), and up 32% year-on-year, while accounting for 1.48% of the GDP. 

Outstanding government bonds climbed 44% against 2015 during the same period, up 14.7% year-on-year and accounting for 21.5% of the GDP. 

According to Linh, this showed a strong growth of the corporate bond market over the past few years. 

However, there remain shortcomings of the market compared to regional economies, including Thailand, the Philippines, and Malaysia. The ratio of outstanding bonds to the GDP in Thailand is 21.33%, Malaysia 46.3% and the Philippines 7%, much higher than that of Vietnam. 
Additionally, short-term loans in Vietnam accounted for 63% of the total, comparing to 43% of Thailand, the Philippines 28.5% and Malaysia below 16%. The country’s bond interest rate remains high compared to other countries.

However, the liquidity of the corporate bond market showed the huge potential for development, Linh stated. 

The transaction size of the Vietnamese bond market in 2018 grew by 63% year-on-year, while that of Thailand was 0.9%, the Philippines 0.12%, and Malaysia 1.33%. 
Linh expected Vietnam’s corporate bond market to boom in the near future, taking into account high liquidity and growth rate of the bond market, as well as favorable legal framework. 

Decree No.163 is the replacement of Decree No.90, which creates a new legal framework for enterprises to raise capital through the issuance of bonds. Decree No.163, which is scheduled to go into force in early 2019, now removes the conditions stipulated in Decree No.90 that the issuer of bonds must have profit in the year preceding the issuing year.

The new decree also provides specific provisions for enterprises to issue bonds in several installments. Notably, enterprises could issue bonds for capital mobilization in several installments in accordance with the tempo of execution of investment projects.

Moreover, corporate bonds issued separately for less than 100 investors do not include professional securities investors, aiming to differentiate the private and public mobilization channels.