Efforts made to ease stock, corporate bond crunch
Vietnam is seeking to expand the nation’s corporate bond market in response to diverse business credit needs and efforts to ensure liquidity.
Limited cash flows
Tran Thi Thu Trang, Deputy Chief Executive Officer of the Techcom Securities Joint Stocks Company (TCBS) said that businesses are facing difficulties in raising capital, while looming bonds maturities also put pressure on businesses that cannot find the capital to repay or restructure their debts. Trang proposed additional policies to enhance enterprises’ access to capital, focusing on public issuance, which has a strict legal appraisal process and help increase investor confidence.
According to General Director of VNDIRECT Securities JSC Nguyen Vu Long, the biggest problem for the bond market today is liquidity of enterprises. Banks have run out of credit room from the middle of the 2nd quarter to the beginning of the 3rd quarter, and other capital mobilization channels have also posed obstacles. Meanwhile, very few businesses were able to raise capital through new bonds in the fourth quarter of 2022.
According to Le Quoc Binh, General Director of Ho Chi Minh City Technical Infrastructure Investment JSC, repaying bond debts to investors is the responsibility of the issuers, not the state, and they must manage all mobilization channels in order to maintain market credibility.
At a Nov. 23 meeting to discuss easing difficulties for the stock and corporate bond markets, organized by the Ministry of Finance (MoF), Minister of Finance Ho Duc Phoc warned that investor confidence in bonds and stocks has declined recently. He described the stock market as an “economic thermometer” that responds to troubles such as the 2022 case of Tan Hoang Minh, FLC, or An Dong company and SCB bank. The VN-Index has decreased by 38 percent compared to the beginning of 2022, he added.
Businesses seek capital resources to maintain liquidity
Corporate bonds are an important medium and long-term capital market tool for businesses and the economy. However, as of September 30, 2022, the whole market has VND1.26 quadrillion, equal to nearly 10 percent of the outstanding loans of commercial banks. Recent violations in this field led to money withdrawals among investors, and caused difficulties for enterprises in capital borrowing.
Deputy Minister of Finance Nguyen Duc Chi said that the MoF will work with relevant ministries and agencies to report to the government and the Prime Minister and discuss immediate and long-term solutions, helping the market continue its sustainable development.
|Deputy Minister of Finance Nguyen Duc Chi: The Ministry of Finance will review the legal framework, including the recently issued Government Decree 65/2022/ND-CP on offering and trading of privately issued corporate bonds, and listen to opinions of business representatives in order to report to the Prime Minister and seek appropriate adjustments. Decree 65 is the latest effort in the government’s action plan to develop a more transparent and sustainable bond market.
VietNam Economic News