The corporate bond market will enter new period of development

The corporate bond market continues to be an effective medium and long-term capital mobilization channel for businesses. Photo: Internet

Applying high requirements to restore market confidence

According to data from the Vietnam Bond Market Association, in 2023, total value of issued corporate bond is worth at VND 311,240 billion, including 29 issuances of the publically offered bond valued at VND 37,071 billion, and 289 issuances of the privately placed bond. Banking is the industry group that has issued the largest volume of bond worth VND 176,006 billion, followed by the real estate group at VND 73,202 billion. In December, enterprises have bought back bonds worth VND 32,677 billion, decreasing by 50.4% year-on-year.

Fiin Group data shows that the privately placed bond market saw a slight recovery in 2023 with the worth of VND 345.8 trillion. The value of the publically offered bond reached VND 37 trillion. The issuance of industry groups showed signs of recovery after a period of gloomy issuance.

We expect that the market will remain its slow growth trend in 2024 due to the impact of provisions on professional securities investor and mandatory credit ratings of Decree 65/2022/ND- CP, which have come into effect. However, investors will benefit from these conditions because of transparency, as well as the quality of newly issued corporate bonds is expected to improve, Fin Group assessed.

According to Fiin Group, the volume of privately placed bond decreased by 14.13% in 2022 to 9.8%/ GDP in the end of the year due to the slow insurance of new bonds while the strong development of buyback activities. The structure of corporate bonds by industry is still implemented by credit institutions with VND353.2 trillion (39% of outstanding bond value) and real estate with VND294 trillion VND (accounting for 33% of outstanding bond value).

Fiin Group expects that the corporate bond market in 2024 will enter a new period of development in a stricter direction with the application of closer requirements for all market participants, thereby helping the issuance of new bonds recover. The effect of regulations in Decree 65/2022/ND-CP in 2024 will provide stricter discipline for all stakeholders and support the restoration of market confidence. The need for large issuance by banking groups to supplement capital and meet financial safety targets will lead the bond market in 2024.

VNDIRECT Securities experts also said that the corporate bond market may gradually recover after the removing of difficulties for the market through the gradual recovery of corporate bond issuance and the intense negotiations on extension of bond terms after the effect of Decree 08/ND-CP.

In 2023, the total value of matured privately placed bonds increased by about 100% year-on-year to VND 216 trillion, including about 40% of real estate group. Amid the difficult business operations and tight cash flow, many issuers have implemented negotiation plans to extend bond terms with bondholders. According to VNDIRECT's summary, as of December 29, 2023, the total value of extended privately placed bonds reached about VND116 trillion.

The corporate bond market in 2024 will gradually restore investor’s confidence

Experts also say that the pressure on corporate bonds due in 2024 is still significant. The total value of privately placed bonds due in 2024 is about VND 207 trillion, down 3% year-on-year, including 59.3% of real estate enterprises. Besides, there are still many issuers facing difficulty paying due bond debt.

According to VNDIRECT, about 71 issuers are late in paying due bond debt, the total outstanding corporate bond debt of these issuers is about more than VND172.5 trillion, accounting for about 16.9% of the outstanding bond debt in the entire market, and most of the issuers are real estate operators. In addition, the issuance may become quiet again, when the provisions in Decree 08/ND-CP including regulations on professional securities investors and mandatory credit rating regulations will officially take effect from the beginning of 2024.

Minister of Finance Ho Duc Phoc sai that the volume of matured bonds in 2024 is worth about 301 trillion VND. However, the macroeconomy and financial and monetary markets are currently much more stable compared to the end of 2022 and the first months of 2023. These are favorable conditions for issuers to stabilize production and business activities and fulfill principal and interest payment obligations to investors. Each industry and field has its own operating characteristics, so it will have different levels of recovery and development.

Recently, the Government has directed ministries and sectors to drastically implement solutions, so since the second quarter, the corporate bond market has shown signs of improvement and investor psychology has gradually restored. In addition, some organizations proactively buy back bonds to restructure capital sources, bond restructuring negotiations continue to be implemented, helping the issuers have more time to recover production and business and create cash flow to repay debt, relieve liquidity pressure.

Through assessment, the implementation of Decree 08/2023/ND-CP is relatively effective. By the end of 2023, 57.3% of the volume of bonds with delayed repayments had been negotiated, of which 6.8% had been paid part of the principal and interest to investors, and 50.4% had been negotiated to restructure bond debt.

The recovery of macro-economy, the good financial potential of investors, the stable production and business activities, and ability of debt payment until the new issuance period, thereby rebuilding confidence for investors and strengthening psychology for the corporate bond market and the capital market.

The current interest rate level is also at a relatively low level, businesses with good projects and feasible business plans can access credit capital sources to serve production and business, creating cash flow for implementation. debt obligations, including corporate bond debt obligations.

Motivated by the comprehensive implementation of solutions on the legal framework and strengthening of inspection and supervision, and the improved macroeconomy, Minister Ho Duc Phoc said that the corporate bond market in 2024 will gradually restore investment confidence, and to be an effective medium and long-term capital mobilization channel for businesses.