Transparent corporate bond market a long-term capital channel
Transparent corporate bond market a long-term capital channel
An efficient, transparent corporate bond market is a sustainable medium and long-term capital channel.
There will be a significant volume of corporate bonds that will mature in the 2023-2025 period, at more than VND700 trillion, excluding interest, said economist Can Van Luc at the seminar "Healthy financial market and real estate market for fast and sustainable economic development" under the Viet Nam Economic Forum 2022 held last week.
The industry groups that issue the most corporate bonds are commercial banks and real estate. Corporate bonds issued by commercial banks have very little risk, due to their own characteristics, Luc said.
First, they are mainly issued by large-scale banks whose business results are quite good and stable. Second, publicity and transparency are ensured because the majority of commercial banks have been independently audited, internationally audited and listed on the stock exchange.
Third, the issuance of bonds by commercial banks must comply with the strict regulations of the State Bank on prudential ratios. Fourth, the issuance purpose is clear, mainly to increase Tier 2 capital, ensure capital adequacy ratio in accordance with international standards such as Basel II.
Fifth, commercial banks have a risk reserve fund to reserve for credit and investment activities, Luc said.
As for the real estate group, according to Luc, real estate businesses have issued nearly VND215 trillion in 2021 and VND50 trillion in corporate bonds in the first 10 months of 2022, ranked 2nd in volume, after credit institutions, with an average interest rate of 10.35 per cent per year. Accordingly, the amount of mature bonds of real estate enterprises is also very large, especially in the next 2 years, about VND115 trillion per year, excluding interest.
To solve this problem, under normal conditions, businesses will find new sources of capital from corporate bond issuance, bank loans, and share issuance, to maintain and develop production and business.
However, the ability to draw capital of businesses in the near future will still be difficult, Luc said. Consecutive violations have significantly reduced investor confidence, and individual investors have also become more apprehensive after the recent incidents. In addition, Decree 65/2022 has introduced stricter regulations for private placement of corporate bonds. In October 2022, there was only one corporate bond issuance with a value of VND210 billion, a decrease of 99 per cent compared to the previous year.
“The stock market is no longer as active as in the previous period, so it is still difficult to raise capital through this channel. In addition, it is not easy to sell and sell assets to repay debts at present due to the quiet real estate market and slow recovery. Therefore, a part of businesses, especially in the real estate sector, have the potential to default on bonds, if there is no appropriate and timely solution," Luc said.
In the short term, it is necessary to review, identify and classify high-risk issuers, said Nguyen Quang Thuan, Chairman of FiinRatings.
It is necessary to speed up the process of debt settlement. Accordingly, weak businesses prepare plans or restructure their debts as soon as possible. For violations, it is necessary to accelerate the completion of court procedures, judgments and settlement of debt obligations, he said.
For the medium and long term, Thuan said the issuers should continue to standardise issuance conditions, diversify products such as green bonds. It is necessary to standardise the conditions for consulting and distribution activities; improve information transparency, promote the role of the representative of creditors, the court, and the establishment of a guarantee fund; apply independent ratings and form a bond pricing unit.
