Illustrative image. (Source: VNA) Hanoi (VNA) – Vietnam is making concerted efforts toimprove the quality of information disclosure and transparency of corporatebond issues and listings to develop a healthy bond market and reduce risks forinvestors.
The corporate bond market in the country has rocketed inrecent years. The Hanoi Stock Exchange (HNX) estimated that close to 89.5trillion VND (3.85 billion USD) worth of corporate bonds were issued in thefirst half of 2019, up 34 percent from the same period last year.
According to Nguyen Hoang Duong, Deputy Director of theMinistry of Finance’s Department of Banking and Financial Institutions, agrowing number of firms raise capital by issuing bonds, a good sign for the developmentof the market, given slowing credit growth as commercial banks must reduceshort-term funding moiblisation for medium- and long-term loans to comply with theState Bank of Vietnam regulations.
By June 24, corporate bonds outstanding value accounted for10.22 percent of 2018’s Gross Domestic Product (GDP), more than 3 percenthigher than the goal for 2020 set by the Government. However, it is relativelysmall compared to the scale of the bank credit channel and the level of othercountries in the region (20 – 50 percent of GDP). Most firms still look forfunding via bank loans.
Today, bond issue rules have been relaxed, said Le HoangChau, President of the Ho Chi Minh City Real Estate Association (HoREA). To issuebonds, a company is no longer required to be profitable in the year before theproposed issuance, though this does pose greater risks to secondary investors,he noted.
Some companies even raised their bond yield rates twice ashigh as bank deposit interest rates to attract investors but it is a riskyapproach.
To solve the problems, the Government issued a decree on theissuance of corporate bonds which sets higher requirements for pre-tradedisclosure to protect the rights and interests of investors.
Draft amendments to the Securities Law have also beensubmitted to the National Assembly, which contain rules on professionalinvestors. It suggests that the private placement of bonds should only be madeto high net-worth individuals or companies with experience in finance.
Additionally, the amended draft law requires issuers toreceive credit ratings before issuing bonds to the public to better supportinvestors, especially individuals who are less experienced. The Ministry ofFinance has licensed one credit rating provider and is taking moves to inviteother foreign providers to Vietnam.
The State Security Commission of Vietnam is also working tostandardise requirements and procedures of corporate bond issue and cut thetime required for first public offering.-VNA
VNA
