Investors will benefit when corporate bond market is transparent: experts

Investors can benefit from better and more efficient products following the government’s regulatory crackdown on illegal practices by certain companies, ensuring the bond market develops more sustainably, economists assure.

 

Assoc Prof Dr Dinh Trong Thinh, a senior lecturer at the Academy of Finance, said the bond market is an efficient medium- and long-term capital mobilisation channel for businesses that help them reduce their dependence on bank credit.

However, this year corporate bond issuances have reduced significantly after authorities tightened conditions for bond trading by credit institutions and intensified checks and oversight.

Though the market has slowed down, the government’s move to reform issuance and trading of corporate bonds and boost transparency is imperative.

The bond market needs to be restructured with more stringent regulations to avoid the risk of mass collapse and protect investors’ interest, he said.

“The Vietnamese corporate bond market has huge potential for growth. This is an important capital source for the economy and businesses and an attractive investment channel for investors, especially when safety criteria are improved steadily.”

Nguyen Thanh Ha, director of SB Law, said controlling the issuance of corporate bonds is imperative, but it should not cause a bottlenck in the bond market.

Recent violations by some individuals and organisations in the corporate bond market are important lessons for the financial sector to draw and improve, and the violations do not represent the whole market, he said.

“We should not look at these violations in a negative way, but in a positive way. They are warning signs [for the sector] to make some adjustments to develop the market in a more transparent and healthy manner, but not create a knot in the bond market."

Assoc Prof Dr Ngo Tri Long, former director of the Ministry of Finance’s Price and Market Research Institute, said authorities are slapping stronger sanctions to ensure the market’s healthy development.

Strictly dealing with violators would help the bond market become safer and more transparent, enterprises with good assets, prestige, transparency, and good business prospects could raise funds through bonds, and investors would have the opportunity to invest in a safe and profitable asset, he said.

Investors, especially retail investors, need to know about the market to prevent risks and should buy bonds of leading enterprises with a sustained development history, he said.

Bond interest rates may not be much higher than bank savings interest rates, but it is a safe asset class, especially for inexperienced investors, he said.

Besides, investors need to carefully consider the professionalism of the issuance management entity and the intermediary between them and the bond issuer to avoid risk.

They should not sell off their bonds before maturirty to avoid losses, he added. 

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