Vietnam’s bond market slightly down in Q3, but up 21% yoy: ADB

Vietnam’s local currency bond market at the end of the third quarter of 2022 showed a marginal contraction of 0.2 percent quarter-on-quarter (q-o-q) to VND2,323.5 trillion (US$97.4 billion), after its strong growth in the previous quarter, according to the latest Asia Bond Monitor (ABM) by the Asian Development Bank (ADB).

 

This slowdown has reserved the previous quarter’s rapid growth of 8 percent q-o-q, but compared with the same quarter in the previous year, Vietnam’s bond market grew 21.1 percent year-on-year (y-o-y) in the period, slowing from the 31.4 percent y-o-y expansion in the previous quarter.

The decline was mainly due to a contraction in the government bond segment and a slowdown in the corporate bond segment, the ABM, which was issued on Friday, reported.

Such a situation in Vietnam has resulted from the overall context that emerging East Asia witnessed the accelerating deterioration of financial conditions and rising bond yields between August 31 and November 4, largely driven by aggressive monetary tightening in major advanced economies in the world.

In respect of government bonds, Vietnam’s local currency government bond market at the end of September contracted 2.0 percent q-o-q to VND1,604.9 trillion ($67 billion).

Much of the decline can be attributed to central bank bills, whose outstanding bond stock fell significantly by 70.3 percent q-o-q in the third quarter of this year.

In contrast to the previous quarter’s aggressive expansion, the ABM said, central bank bills displayed the largest decline among all bond segments during the third quarter, with the total stock of central bank bills slumped to VND30.4 trillion ($1 billion) at the end of September from VND102.4 trillion ($4 billion) at the end of June.

As regards corporate bonds, growth in the corporate bond segment moderated to 4.1 percent q-o-q in the period from 9.5 percent q-o-q in the previous quarter, according to ABM.

At the end of September, the total outstanding corporate bond stock climbed to VND718.6 trillion ($30 billion) and was mainly dominated by the banking and property industries, which collectively accounted for 75.3 percent of the aggregate corporate bond stock.

Vietnam’s top 30 corporate issuers, largely comprising firms from the banking and property sectors, including a few finance and energy firms, had an aggregate bond stock amounting to VND448.6 trillion ($18.8 billion) at the end of September, which was equivalent to 62.4 percent of the total local currency corporate bond market.

The top corporate issuer remained the state-owned Bank for Investment and Development of Vietnam (BIDV), with an outstanding bond stock of VND58.4 trillion ($2.45 billion) at the end of the July-September period, accounting for 8.1 percent of the total corporate bond stock of Vietnam.

The ABM also noted that the Vietnamese government promulgated Decree No. 65 in September, amending the existing regulations on the offering and trading of privately issued bonds, with an aim to enhance transparency and sustainability in the bond market by tightening disclosure requirements and imposing stricter conditions on bonds’ private placements.

The new legal document was developed to protect investors in several key areas, such as limiting the purpose of bond proceeds, implementing new requirements on the issuer’s credit rating, and mandating additional disclosures by the issuers.

According to the Vietnam Bond Market Association (VBMA), the total volume of corporate bond issuance in the third quarter of 2022 decreased by about 68 percent y-o-y.

Construction and real estate groups saw the most declines in bond issuance value in the period, with the drops of 98.7 percent and 93.4 percent, respectively.

Most corporate bonds issued in the third quarter of 2022 had maturities of 1-3 years, accounting for about 52 percent of the total issuance volume, with an average issuance yield of 7.17 percent per year, a slight increase from the quarter earlier.

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