Vietnam needs a stable economic and financial system to create asustainable bond market in the future, according to experts gathered fora workshop, entitled "Macroeconomic stability and sustainability ofbond market in Vietnam" in Thua Thien-Hue.
Vietnam'seconomy in 2013 had many opportunities and development challenges. Inrecent years, the government has directed and managed the economy toachieve many positive results, Vu Bang, Chairman of the State SecuritiesCommission, said.
He was delivering an openingspeech at the workshop sponsored by the Deutsche Gesellschaft frInternationale Zusammenarbeit – GIZ (former German Technical Cooperation- GTZ) and Ha Noi Exchange Board (HNX) in Thua Thien-Hue.
The domestic economy has been stable and inflation controlled at 4.63per cent during the first nine months of this year, he said.
Interest rates from deposits and loans have fallen, while exchangerates of Vietnamese dong and foreign currencies have remained stable andforeign exchange reserves have increased.
However,the economy has been hindered by difficulties, including a lack ofstability of the macro economy, difficulty in balancing the budget and ahigh level of bad debt.
The difficulty in theeconomy had affected the stock market of Vietnam, he said. But, on thebond market, the total value of listed bonds stood at 521 trillion VND(26 billion USD), up 28 percent compared with the same period in 2012.
Government bonds are dominant in the Vietnamese bond market. Both sizeand liquidity of the government – guaranteed bond market are very low.
The enterprise bond market does not play animportant role, nor is it well managed, said Dr. Michael Krakowski,Chief Technical Advisor of GIZ Macroeconomic Reforms Programme.
Products available in the bond market are limited and simple. Newproducts, especially derivative products which could help to activatethe market to improve its liquidity and to act as hedging tools, are notavailable, or unofficially implemented without any appropriategoverning legal framework to regulate, monitor and ensure sound and safetransactions.
All frame conditions for the bondmarket are currently unstable and lack sustainability, such as a highstate budget deficit, difficult budget income sources and high bondinterest rates.
About 80 percent of total volume andvalue of bond transactions are currently performed by commercial banks.Bond market instability, if any, would be a serious danger for thebanking system, as well as for the entire Vietnamese financial system.
"The key solution to achieving a stable, sound andsustainable bond market is to continue efforts aiming at macroeconomicand financial system stability. Restructuring financial markets towardstabilization and strengthening risk management would be the necessarystep to be made," said Krakowski.
"In addition,technical solutions would need to be developed and deployed,accordingly. Vietnam would need to implement proper public debt strategyand develop models to forecast supply and demand in the bond market,which take into consideration key factors, such as budget, publicinvestment, changes in monetary markets and interest rates, as well asrequirements of issuing new bonds to pay back existing debt."
"In the medium and long run, Vietnam would need to gradually movetowards lower budget deficits and sustainable balances budgets," hestated.
"It is also vital for Vietnam to quicklyimplement regulations and plans on new bond products and shifting thebond settlement system to the State Bank of Vietnam in order to ensuremarket soundness, and improve risk management," he concluded.-VNA
Vietnam'seconomy in 2013 had many opportunities and development challenges. Inrecent years, the government has directed and managed the economy toachieve many positive results, Vu Bang, Chairman of the State SecuritiesCommission, said.
He was delivering an openingspeech at the workshop sponsored by the Deutsche Gesellschaft frInternationale Zusammenarbeit – GIZ (former German Technical Cooperation- GTZ) and Ha Noi Exchange Board (HNX) in Thua Thien-Hue.
The domestic economy has been stable and inflation controlled at 4.63per cent during the first nine months of this year, he said.
Interest rates from deposits and loans have fallen, while exchangerates of Vietnamese dong and foreign currencies have remained stable andforeign exchange reserves have increased.
However,the economy has been hindered by difficulties, including a lack ofstability of the macro economy, difficulty in balancing the budget and ahigh level of bad debt.
The difficulty in theeconomy had affected the stock market of Vietnam, he said. But, on thebond market, the total value of listed bonds stood at 521 trillion VND(26 billion USD), up 28 percent compared with the same period in 2012.
Government bonds are dominant in the Vietnamese bond market. Both sizeand liquidity of the government – guaranteed bond market are very low.
The enterprise bond market does not play animportant role, nor is it well managed, said Dr. Michael Krakowski,Chief Technical Advisor of GIZ Macroeconomic Reforms Programme.
Products available in the bond market are limited and simple. Newproducts, especially derivative products which could help to activatethe market to improve its liquidity and to act as hedging tools, are notavailable, or unofficially implemented without any appropriategoverning legal framework to regulate, monitor and ensure sound and safetransactions.
All frame conditions for the bondmarket are currently unstable and lack sustainability, such as a highstate budget deficit, difficult budget income sources and high bondinterest rates.
About 80 percent of total volume andvalue of bond transactions are currently performed by commercial banks.Bond market instability, if any, would be a serious danger for thebanking system, as well as for the entire Vietnamese financial system.
"The key solution to achieving a stable, sound andsustainable bond market is to continue efforts aiming at macroeconomicand financial system stability. Restructuring financial markets towardstabilization and strengthening risk management would be the necessarystep to be made," said Krakowski.
"In addition,technical solutions would need to be developed and deployed,accordingly. Vietnam would need to implement proper public debt strategyand develop models to forecast supply and demand in the bond market,which take into consideration key factors, such as budget, publicinvestment, changes in monetary markets and interest rates, as well asrequirements of issuing new bonds to pay back existing debt."
"In the medium and long run, Vietnam would need to gradually movetowards lower budget deficits and sustainable balances budgets," hestated.
"It is also vital for Vietnam to quicklyimplement regulations and plans on new bond products and shifting thebond settlement system to the State Bank of Vietnam in order to ensuremarket soundness, and improve risk management," he concluded.-VNA
