Corporate bond issuance needs time to adapt to new policies

Issuance of corporate bonds decreased steadily in the third quarter of 2022

Businesses have been restrained in issuance

According to the report on the bonbond issuance in September 2022 released by FiinRatings, in September, corporate bond issuance continued the downward trend from the beginning of the third quarter with the issuance value only reaching VND16.1 trillion, down 18% from the previous month and down 76% over the same period in 2021.

Generally, in the nine months, the corporate bond market recorded an issuance value of VND246 trillion, equivalent to 36% of the value in 2021, of which 58% of the issued value came from credit institutions and 21% from the real estate industry. Regarding the type of issuance, the rate of public offering only accounted for 3.87%. In general, the third quarter ended, but the corporate bond market is still relatively gloomy.

According to FiinRatings, businesses have been restrained in issuance activities due to Decree 65/2022/ND-CP and increased repurchasing to reduce the pressure of maturity and deal with bonds that may be disadvantaged by the new regulations.

FiinRatings believes that the corporate bond issuance in the primary market will only increase sharply next year, as the market needs time to get used to the new policies of Decree 65. In addition, bond investor sentiment will be better after events surrounding An Dong Group and Van Thinh Phat Group, and VKC Holdings' delay in paying bond interest, negatively affected investors who currently own bonds as well as want to invest in an a channel with a higher interest rate than this a bank deposit.

The introduction of Decree 65/2022/ND-CP has added more stringent regulations on the method of offering and conditions for identifying professional individual investors. This will affect the demand for bonds by narrowing buyers. Currently, the Ministry of Finance and the State Bank of Vietnam are actively developing specific circulars and guidelines and FiinRatings experts believe that the market will witness the return of issuance as well as an increase in the number of businesses participating in this capital channel.

Waiting for the green bond channel

It is worth noting that recently, the market has witnessed many activities to promote green bond mobilization in Vietnam. This is an important capital channel when many domestic and foreign financial institutions are promoting lending and investment activities in this field. Vietnam is currently preparing to develop its own Sustainable Financial Classification Framework and issuing green criteria (Taxonomies) with specific criteria and supporting policies.

Therefore, FiinRatings believes that green bonds will be a potential capital mobilization channel because of high demand, especially from foreign investors and institutions. Green bonds will also help businesses expand their investment capital mobilization channels in an environment of economic tightening and limit  ed bank credit. Besides, green bonds are partially guaranteed, so they are less risky than ordinary bonds.

According to FiinRatings, investors participating in a green bond fund will receive returns within the same threshold with higher performance than traditional bonds and diversify their investment portfolios according to the "greening" trend of the economy.

. For issuers, sustainable bonds, green bonds with low interest rates, long maturities, and a 50% reduction in registration and listing fees allow small and medium enterprises to participate in this capital channel and help them access to a network of investors of sustainable bonds and green bonds.

In addition, participating businesses also receive technical support from foreign organizations, and incentives in credit, interest rates and collateral for clean technology projects and organic agriculture projects. Therefore, Vietnam has a lot of room to develop the green bond market according to the global trend and towards a more sustainable future.

In the development trend of green bonds, from March 2022, FiinGroup was officially approved by the Climate Bonds Organization (CBI) as the first authorized unit in Vietnam for the certification of green bonds. This is the only certification that is widely used in over 30 countries around the world.

The “Certification Mark” is used to designate green bonds, green loans, and certified green debt instruments. Globally, certified Bonds reached US$210 billion as of December 31, 2021.