|The corporate bond market may restore in the second half of 2023.|
The market will drop sharply in the next few quarters
According to data from the Vietnam Bond Market Association, only one private bond issuance worth VND210 billion was recorded in October 2022.
From the early year to the end of October, two international bond issuances were valued at US$ 625 million, 23 public offerings worth VND10,599 billion, and 413 private offerings valued at VND240,761 billion.
In the first 10 months of the year, the value of publicly offered bonds decreased by 56%, and privately placed bonds declined by 51% compared with the previous year.
Data from VNDIRECT Securities Company shows that the corporate bond market plunged in the first nine months of 2022. In March 2022, the corporate bond market slowed down to wait for the issuance of the Decree amending Decree 153/2020/ ND-CP to protect the legitimate interests of investors as well as improve the quality of the capital market.
The total value of corporate bonds issued in the three quarters fell sharply by 43.5% to VND 248,603 billion year-on-year, including VND240,804 billion of privately placed bonds and VND7,799 billion of publicly offered bonds.
According to VNDIRECT, the pressure of bond maturity increases from the fourth quarter of the year. As a result, the total value of privately placed bonds set to mature in the fourth quarter will be VND58,840 billion. This figure falls by 9.1% compared with the previous quarter and increases by 87.7% compared with the year ago.
VNDIRECT said that the market might continue to slow down in the next few quarters due to the companies’ violations in the issuance of corporate bonds, showing the management agency’s efforts in cleaning up the capital market.
The promulgation of Decree 65/2022/ND-CP supplementing and amending Decree 153 on private placement of bonds on September 16 shows a positive sign for the capital market in the long term. Although Decree 65 provides stricter regulations than the former provisions, it also loosens some provisions compared with the former draft decrees.
“We think that market members need time to adjust to being consistent with the new regulations. Therefore, the corporate bond market may slow down in the next few quarters,” said VNDIRECT.
VNDIRECT said that the total value of corporate bonds may recover from the second half of 2023 because the new Decree 65 allows enterprises to issue corporate bonds for debt restructuring purposes. This is the key content toward losing regulations to help enterprises restructure debts while accessing the corporate bond issuance channel.
Boosting market confidence
Fiin Ratings said that a corporate bond’s credit risk to the system’s safety is shallow. Fiin Ratings data shows that the outstanding value of corporate bonds by the end of September reached more than VND1.3 million billion (equivalent to more than 13% of GDP in 2021). If excluding bank bonds, the outstanding value of corporate bonds of non-banking enterprises is VND 908.8 trillion and of real estate issuers of VND455 trillion.
“This figure only accounts for about 4% of the total credit balance of the whole Vietnamese banking system. According to our credit rating results for the real estate sector, the credit quality of this sector is highly fragmented, and there are still many businesses with good financial health and the ability to meet debt obligations.
We believe that investors should stay calm and be careful with inaccurate information to avoid selling off and cutting losses in corporate bonds without an assessment on the issuer’s financial status, “
According to Fiin Ratings, a specific assessment of credit quality and maturity risk shortly will be an important solution to restore market confidence, especially among individual professional investors. The Ministry of Finance and the State Bank have issued specific circulars and guidelines. The market will witness the recovery of issuance activities and an increase in the number of participants.
Minister of Finance Ho Duc Phoc said that confidence plays an important role in the financial market, especially in the corporate bond market. When the market develops stably, efficiently and safely, investors are willing to participate, and then the market will have sustainable development”.
The corporate bond market still has potential and needs to be facilitated for safe, transparent and sustainable development. The Minister said that the private corporate bond market violations had reduced investors’ confidence in the corporate bond channel. Therefore, regaining confidence in the market is also the responsibility of many regulatory agencies and market participants.
“The Ministry of Finance has advised the Government to issue Decree 65 with many new regulations towards improving the responsibilities of the parties involved. The promulgation of new policies is an opportunity for market transparency and creates conditions for legitimate businesses, and professional investors,” Minister of Finance Ho Duc Phoc said.