Corporate bond market focuses more on quality

A bank employee counting money. The corporate bond market currently has a slow recovery pace, making it difficult to have a breakthrough in issuance volume in the next 12 months. — VNA/VNS Photo

HÀ NỘI— The corporate bond market is developing towards a more in-depth approach, focusing on quality, said Nguyễn Quang Thuân, Chairman of FiinGroup.

At the Vietnamese Corporate Bond Market Development Solutions Seminar organised by FiinRatings on Thursday in Hà Nội, Thuân said that it was crucial to review and address the remaining problems of the corporate bond market.

The corporate bond market currently has a slow recovery pace, making it difficult to achieve a breakthrough in issuance volume in the next 12 months, he said.

“In investment, the higher the profit, the higher the risk,” said Trịnh Quỳnh Giao, CEO of PVI Asset Management Company (PVIAM).

“Bond interest rates depend on many factors, including the financial health of the issuing organisation, the stability of the industry, bond liquidity, payment guarantees from banks, and collateral assets,” she said.

“For real estate businesses, if they issue bonds with a 15 per cent interest rate but their project generates a 30-per cent profit, then that interest rate is not considered high, and even a 20-per cent interest rate is acceptable.”

“Usually, banks face stricter risk management by the State Bank of Việt Nam, so the possibility of losing capital invested in bank bonds is low, and therefore, interest rates range from 5-7 per cent,” she said.

According to Nguyễn Quang Thuân, Chairman of FiinGroup, transparency of information is the key issue.

“In reality, the average interest rate of corporate bonds in the first quarter of 2023 is 9 per cent, and there have been successful transactions with bonds issued at an interest rate of up to 14 per cent. Therefore, it should not be assumed that high interest rates are bad or low interest rates are good for the market,” he said.

In the second half of 2023, the corporate bond market is unlikely to recover as robustly as in previous years because bond maturity pressure will persist until the end of the year, according to VNDIRECT Securities Co.

In the third quarter of 2023, VNDIRECT's estimates indicate that more than VNĐ75.9 trillion of corporate bonds will come due, a rise of 14.9 per cent compared to the second quarter of 2023.

The real estate industry continues to represent the most substantial proportion, with nearly 43.6 per cent of the total value of bonds due in the third quarter of 2023. Concurrently, developers are grappling with construction delays due to liquidity challenges, potentially leading homebuyers to withhold mortgage payments and adversely affecting market sentiment.

According to the Việt Nam Bond Market Association (VBMA), there were 30 private bond issuances in August with a combined value of over VNĐ30.6 trillion. These had an average interest rate of 9.18 per cent per annum and a term ranging from 2 to 5 years.

However, September has seen no issuance tranche.

From the beginning of the year to mid-September, the total value of corporate bond issuances stood at nearly VNĐ140 trillion. This comprised 17 public issuances and 111 private issuances, which made up 88 per cent of the total issuance.

VNDIRECT estimates that in September 2023, corporate bonds worth more than VNĐ25.8 trillion will mature.

As of August 24, about 67 companies were on the list of late payment obligations for either interest or principal on corporate bonds, as per HNX's notification.

VNDIRECT's calculations suggest that the total outstanding bond debt of these companies amounts to approximately VNĐ173.68 trillion. This represents about 15.9 per cent of the total outstanding debt of individual corporate bonds across the market. The majority of these issuers belong to the real estate sector.