Corporate bonds under strict control this year

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VIETNAM, January 5 –

A bank clerk handles cash. The corporate bond market has flourished with an estimated annual issue value of over 500 trillion VN ($ 21.9 billion) in 2021. – VNA / VNS Photo

HÀ NỘI – With the corporate bond market showing signs of rapid growth, this channel for raising capital will be closely scrutinized and monitored this year.

The corporate bond market has flourished with an estimated annual issue value of over 500 trillion VN ($ 21.9 billion) in 2021, bringing the total value of recent outstanding corporate bonds to nearly $ 1. , 2 quadrillion VN, or about 11.4% of total credit. in circulation of the entire economy and accounting for around 14.5% of GDP in 2021.

In the context of tightening bank credit growth, corporate bonds have become an increasingly important medium and long-term capital channel for companies. In the residential real estate sector, corporate bonds even account for almost half of the total loan balance.

As the corporate bond market has shown signs of rapid growth, the flaws in the market are becoming more evident. Thanks to easy issuance conditions, a series of loss-making companies have succeeded in raising trillions of ng. Most corporate bonds in the market are unsecured. The rest is provided mainly by future projects or by stocks. In other words, if a business collapses, investors are left empty-handed.

The risks have prompted market regulators to inspect the market. At the end of 2021, a series of bond issuers were sanctioned by the State Securities Commission for violating the provisions of the law.

In a recent announcement, the State Securities Commission said it will continue to closely inspect and monitor the issuance of corporate bonds in the future. In addition, the State Bank also issued Circular No. 16/2021 / TT-NHNN, tightening up the corporate bond trading activities of credit institutions.

Đinh Trọng Thịnh, an economist, said u Tư (Vietnam Investment Review) Journal that it was necessary to “purge the corporate bond market to avoid collapse”.

“Only a few issuers breaking the law would cause investors to lose confidence in the overall corporate bond market,” he said.

“Although the corporate bond market is in its early stages of development, its recent magnitude has significantly reduced credit pressure for banks. However, if a ripple effect occurs, the entire national financial system will be in turmoil, ”he said.

Due dates

As corporate bond issuance activities tighten, the maturity dates of most bonds in the market are approaching.

Nguyễn Quang Thuân, chairman of the board of directors of FiinGroup, said that of a total of nearly 1.2 quadrillion VNĐ of recently outstanding corporate bonds, up to 40.7% will mature in 2022. and 2023.

The outstanding amount of corporate bonds in the non-financial sector currently stands at VN 780 trillion, or nearly 69% of the total value. Over the next three years, businesses (excluding banks, securities firms and financial firms) will be under pressure to pay their investors over VN.5 trillion in debt.

The Ministry of Finance is drafting a decree amending and supplementing a certain number of articles of decree n ° 153/2020 / ND-CP of December 31, 2020 stipulating the private placement of corporate bonds on the national market and the international market. In this way, investment conditions will be tightened and companies will have many difficulties raising capital to pay their debts when the bonds come due.

In order to secure the source of debt repayment, experts said companies need to standardize their operations to meet the conditions for issuance of bonds. Companies should also consider other sources of capital to pay off debts to investors.

Both securities and corporate bonds are medium and long-term capital mobilization channels for the economy, it is necessary to facilitate their development to reduce the dependence of corporate capital on the banking system, ào Minh Tú, vice-governor of the State Bank of Việt Nam, mentioned.

“However, corporate bonds are only good for the economy if this market develops transparently,” he said.

The State Securities Commission is urgently building a secondary bond trading floor and tightening the conditions for issuing corporate bonds. The changes to Decree No. 153 are expected to be officially released in 2022. Under these changes, unsecured companies, doing business at a loss, will not be eligible to issue bonds on the floor.

Vũ Thị Thuý Ngà, Deputy Managing Director of Hà Nội Stock Exchange (HNX), said this secondary bond trading room will be launched by the end of 2022, helping to increase liquidity and reduce risk for investors . VNS


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