Developments in corporate bond market promote healthy performance

Do Bao Ngoc, deputy CEO of Vietnam Construction Securities JSC, believes that pressing a trading platform for privately placed corporate bonds into service is of prime importance, and that it should have been done a long time ago.

The move will help by instituting an official trading channel for investors, boosting market liquidity, turning corporate bonds back into an important capital raising channel for businesses, and helping to alleviate the pressure put on banks.

However, there are concerns that this new market might not be robust enough immediately after its launch, as investors are still cautious with corporate bond transactions following notorious cases over the past year, including Van Thinh Phat.

The leader of a Hanoi-based securities firm stated that, in the initial period after the launch of the platform, there will be more sellers than the buyers.

“Market liquidity will only warm up when trust returns. Even though the new trading floor will not immediately unfreeze the market, it will help enhance transparency,” they said.

The issuance of privately placed corporate bonds in June reportedly tripled in volume compared to May.

However, the total transaction volume in the first half of this year still shed 76 per cent on-year, indicating that investors’ appetite for corporate bonds has yet to markedly improve.

The issuance of privately placed corporate bonds in June reportedly tripled in volume compared to May.

Payment infrastructure for these bond transactions has been prepared by many banks.

On May 17, the Ministry of Finance issued Circular No.30/2023/TT-BTC, guiding the registration, depository, and trading of privately placed corporate bonds in the domestic market, effective from July 1.

When the trading platform is launched, investors will immediately be able to sell bonds to others without waiting for the maturity date. It is expected that more than 1,600 bond codes will be put on to the platform when it becomes operational.

According to senior financial expert Can Van Luc, perfecting corporate bond market infrastructure, including creating this specific trading platform, will increase liquidity and entice more investment flows.

For the market to regain its growth momentum, management authorities need to take drastic measures to tackle issuance violations and improve investor confidence.

In addition, it is necessary to quickly reform procedures, shorten the time for issuance licensing, adopt policies to encourage credit ratings, perfect market management and supervision mechanisms, and improve the quality of individual investors.

Experts argue that aside from strengthening inspection, supervision, and transparency, there should be clearer legal provisions to protect investors.

While the bad debt market in Vietnam is still in its infancy and positive conditions have converged, stronger steps need to be taken.

Many businesses will see their bonds mature in 2023, with about $6.5-8.7 billion being due.

Harmful tax competition in East Asia and the Pacific (EAP) has intensified in recent years, with many developing countries in the region using tax incentives as a tool to attract foreign direct investment (FDI).

The State Securities Commission (SSC) is introducing secondary market for corporate bonds, enhancing transparency and investor confidence.