The corporate bond market continues to face headwinds in the second half of the year with billions of US dollars of bonds due this year. (Photo: VNA)Nguyen Ba Khuong, an analyst at stock brokerage VNDirect, haswarned that a significant amount of corporate bonds are set to mature thisyear, leading to financial constraints for issuers and potential difficultiesin meeting bond redemption obligations.
According to VNDirect, around 273 trillion VND (11.57 billion USD)worth of corporate bonds will be maturing this year, with the majority comingdue in the last two quarters.
Many issuers, particularly property developers, have already struggledto meet their bond redemption obligations, which has eroded investor confidencein the market.
While more than 42 trillion VND worth of corporate bonds wererolled over in the second quarter, providing a short-term solution, this doesnot address the fundamental issues at hand, experts noted.
A decree issued in March allows issuers to roll over bondmaturities by up to two years if investors agree. However, if investors do notagree, businesses must fulfill their bond redemption obligations.
Issuers also have the option to negotiate with bondholders torepay with other assets.
Transparency and disclosure key to restoring credibility
To restore credibility in the market, experts emphasised the needfor a comprehensive approach. Transparency and disclosure are key factors inrebuilding trust, they said.
Companies issuing bonds must provide clear and comprehensiveinformation about their financial health, business operations, and riskfactors. This allows investors to assess the creditworthiness of the issuersand make informed decisions.
In addition, regulatory oversight and enforcement need to bestrengthened.
Regulatory bodies should establish stringent guidelines forissuers, underwriters, and rating agencies, and ensure compliance with relevantregulations.
Any attempts to manipulate or misrepresent information should bemet with severe penalties and legal consequences.
It’s also important to develop a well-functioning secondary marketfor corporate bonds, which would facilitate efficient bond-pricing mechanisms,providing investors with liquidity and enabling them to enter or exit positionsas needed.
Enhancing investors' awareness of the fundamentals of bondinvesting, including credit risk, interest rate risk, and market liquidity, isalso crucial.
Experts have proposed settling the various scandals involving bondissuances by major property developers and protecting investors as soon aspossible to free up the frozen market.
The Ministry of Finance recently established a trading platformfor privately placed corporate bonds (PPB).
Minister of Finance Ho Duc Phoc said the launch of the tradingplatform would give fresh impetus to the market, improve liquidity, and providecompanies better access to capital.
He, however, pointed out that there is still a lot of work to doto build a fully-fledged market that is attractive to global investors.
Economist Dinh The Hien said the trading platform allows bondissuers to service their bonds that are coming due, and provides companies withgood financial records better access to capital.
The corporate bond market experienced significant growth in 2020and 2021, driven by increased capital demand from property developers andbanks.
However, the collapse of the property market and the recentinvestigations into bond issuance and improper capital use by large firms havecontributed to the current problems faced by the market.
The Government has established three committees to carry outreforms in liquidity and currency, the property market and corporate bonds.
Prime Minister Pham Minh Chinh has also instructed creditinstitutions to reduce costs to lower loan interest rates for businesses andsupport economic recovery./.
VNA
