Privately-issued bonds: A significant boost for the market

The private corporate bond trading system at the Hanoi Stock Exchange (HNX) officially began operations on July 19th. Around 1,600 private corporate bond codes are scheduled to be disclosed. Companies who participate in the trading platform and issue bonds will have greater access to a bigger pool of investors, improving cash mobilization for production and commercial operations.

Anyone can openly sell their bonds on the private bond market at any time, rather than waiting until maturity or depending on the issuing firms or securities companies to buy them back.

The establishment of a private bond market at this time is critical, as it will provide a considerable boost in resolving the issue of stagnant money that cannot find an exit.

Companies seeking financing through bonds, in particular, will be required to register the full batch of these private bonds. This registration entails keeping and depositing. Continuous trading necessitates the storage of assets in a centralized repository so that each transaction may be linked to the proper owner.

As a result, all assets must be lodged at the depository center, and all private bonds will be traded on the HNX exchange. When professional investors purchase a bond, all relevant information is captured in the trading system.

Professional investors will continue to be the only ones eligible to participate in the private bond market. Vietnam has clear regulations that change with each Circular and Decree. Professional investors must comply with Decree 65 and make orders to acquire bonds through their trading accounts with securities companies, which can be implemented electronically or by agreement, according to these laws. The results of the transaction will be returned to the depository center after the transaction is finished.

The formation of a private bond market has numerous critical advantages. First, improve the openness of private bond market data: Previously, only 100 investors had access to information on private bond issuances. With the bonds being published on the trading platform, all information will be made public.

Second, solve market liquidity issues: This is the most important issue since it allows investors to sell their bonds when necessary. Many bond investors are stranded without this platform owing to concerns with issuing businesses. Although they may negotiate a two-year extension of the loan repayment period, they are still at a disadvantage since they cannot sell the bonds when necessary.

Third, using yields to appropriately estimate bond risk: Yields are sometimes mistaken with interest rates, although they include both price and coupon interest rates. The private bond market makes risk evaluation easier. If the yield is very high, it suggests a high-risk bond since it includes a price decrease element in addition to the coupon interest rate.

Fourth, information transparency: Analyzing private bonds necessitates the examination of prospectuses, financial reports, and changes in the issuing company's production and commercial position. As a result, the rule mandating corporations to update information as it changes benefits both investors and the private bond market as a whole.

According to some, the operation of the private bond market is a type of debt transfer from enterprises to individual investors. Mr. Tuan, on the other hand, is not convinced. On the contrary, he sees this as a means for small investors to recoup their losses. It indicates that there will be a market where faulty or illiquid assets may be sold.

This is considered as a similar answer in mature financial markets, such as Vietnam's existing debt market, which lacks transparency and breadth to allow for mass involvement.

The number of private corporate bond issuances has dramatically decreased up to the second quarter of 2023, decreasing 90% compared to the same time last year, with just VND 42,783 billion issued since the beginning of the year. As a result, the creation of the private bond market will create chances for firms to introduce new products, and investors will have the opportunity to examine their investment portfolios in the present low-interest-rate environment.