New regulations about corporate bond issuance
Privately-placed corporate bonds can no longer be sold within their first year of issuance, according to a new decree.
The decree amends several points of the Decree No 163/2018/ND-CP dated December 4, 2018, about corporate bond issuance with new regulations tightened trading of privately-placed corporate bonds in the domestic market.
According to experts, small-sized enterprises have been issuing corporate bonds in large volumes, creating potential risks for both issuing businesses and investors.
Under Decree No 163, privately-placed corporate bonds were issued to less than 100 investors excluding professional securities investors. However, as trading time was not limited, it created a loophole which allowed companies to issue bonds to less than 100 investors who could sell the bonds freely on the secondary market to more investors.
The new decree, which will take effect on September 1, aims to better manage the corporate bond market which has seen rapid development in recent years and posed significant risks to investors.
According to the new decree, depository organisations must provide information about corporate bond trading within one working day of the trading being completed. Regular updates about bond registration and depository must be provided to the stock exchange monthly, quarterly and yearly.
The new decree also means violations of private corporate bond issuance will be handled in compliance with regulations about handling administrative violations in securities, securities market and other relevant regulations.
The Ministry of Finance said tightened regulations about corporate bond issuance aimed to protect investors and ensure safety for the bond market.
Recently, the Ministry of Finance warned about the overheated development of the corporate bond market, urging investors to be cautious and to invest only when they thoroughly understand the issuing company. The ministry also said investors should not buy corporate bonds without studying possible risks.
The finance ministry’s statistics showed outstanding corporate bonds expanded rapidly, from 6.29 per cent of the country’s gross domestic product (GDP) in 2017 to 9 per cent of GDP in 2018 and about 11 per cent in 2019 (worth around VND640 trillion or US$27.58 billion).
Viet Nam has targeted that the corporate bond market size would be equivalent to 7 per cent of GDP by the end of this year.
In the first four months of this year, enterprises raised about VND58 trillion from issuing bonds, around half issued by real estate companies hungry for capital while credit policies for the property sector were tightened. Some companies even offered very high yields, about 1.5 percentage points higher than the common rate in the market.