Vietnam's bond market remains smallest in East Asia: ADB

The bank noted in its latest Asia Bond Monitor issue that overall bond market growth had contracted by 3.9% quarter-on-quarter due mainly to a decline in government bonds outstanding, which were pulled down by the maturation of all outstanding central bank bills, as these were largely short term in nature.

The weak quarter-on-quarter growth of government bonds was further affected by a 4.9% quarter-on-quarter contraction in the corporate bond stock. On a year-on-year basis, growth in the market rose by 4.1% in the fourth quarter last year, up from 3% in the prior quarter.

The report indicated that the country’s total bond issuance rose by 1.1% quarter-on-quarter to US$21.9 billion in the fourth quarter, recovering from an 8.1% quarter-on-quarter drop in the previous quarter.

Government bond issuance rose by 1.4% quarter-on-quarter, driven by the issuance of government-guaranteed bonds. Central bank bond issuance in the fourth quarter was roughly on par with the previous quarter, while the issuance of Treasury and other bonds rose by 12.4% quarter-on-quarter.

The local bond issuance consisted almost entirely of government bonds, which comprised a 99.7% share of total bond issuance in the fourth quarter. Corporate bond issuance amounted to US$0.1 billion, falling 44.8% quarter-on-quarter in the quarter. At only 0.3%, the corporate segment’s share of total bond issuance in Vietnam was the lowest in the region.

New local corporate debt issuance totaled VND1.7 trillion in the fourth quarter on declines of 44.8% quarter-on-quarter and 86.3% year-on-year. The largest new corporate bond issue during the quarter came from Asia Commercial Bank through a VND1.5 trillion five-year bond.

The country’s 31 largest local corporate bond issuers had aggregate bonds outstanding of VND97.7 trillion as of late last year, accounting for a 97.7% share of the corporate bond stock. Vinhomes, a real estate services firm, continued to hold the top post with outstanding bonds of VND12.5 trillion.

The report noted that most yield curves in emerging East Asia had declined during the review period, with the two exceptions being the Philippines and Vietnam. Meanwhile, Vietnam’s yield movements rose at the short end of the curve largely due to increased funding demand prior to the Lunar New Year, or Tet, holiday.

ADB Chief Economist Yasuyuki Sawada noted in a statement that financial markets in the emerging East Asian region are already feeling the brunt of the effects of the novel coronavirus pandemic, with foreign investment and sector activities taking a tumble, coupled with ongoing trade issues.

“Efforts to cushion the negative impact of the pandemic through stimulus packages and monetary measures to support affected households, businesses and financial markets should continue,” he added.

The report stated that developing Asian economies with strong trade and production links with China, such as Hong Kong, Singapore, Vietnam and the Philippines, will also be materially affected by the virus outbreak.

For many economies in the region, China is both a significant source of foreign tourists and a major export destination, according to the report.

In January, the Vietnamese Ministry of Finance announced 13 market makers, comprising banks and securities companies, which will be allowed to participate in the trading of government bonds and government-guaranteed bonds in 2020.

The list of market markers includes three securities companies, nine commercial banks and one member firm of Agribank.

As a market maker, these firms may participate in government bond auctions and other issuances of government and government-guaranteed instruments, including debt swaps and repurchase agreements.