Demand for capital to rise amid debt repayment pressure
Demand for capital to rise amid debt repayment pressure
Corporate demand for funds is expected to increase in the second half of the year, while concerns persist regarding debt repayment pressures, analysts said.
New real estate developments in Thủ Thiêm urban area. Numerous bond issuers, mostly real estate developers, have been late in bond repayment this year. — VNS Photo Bồ Xuân Hiệp |
According to a report by credit rating agency FiinRatings, the industrial production index saw 6.8 per cent growth in the first five months of 2024, with manufacturing expanding by 7.3 per cent.
In addition, Việt Nam’s exports grew by 13.8 per cent year-on-year in the first half due to recovering demand in key markets, leading to an uptick in imports of raw materials.
The positive trends suggest that businesses now have a stronger capacity to absorb capital, prompting them to explore various financing options such as loans and bond issuances.
Moreover, the resolution of legal obstacles in the real estate sector is expected to drive credit growth in the sector.
In response to the expected credit expansion, banks have been issuing bonds to raise medium- and long-term funds.
In the corporate bond market, there were 26 bond issuances last month totaling VNĐ23.2 trillion (US$911 million), with credit institutions being the primary issuers.
Since the beginning of 2024, total corporate bond issuance has reached VNĐ36,088 trillion, with public and private issuances accounting for VNĐ8.9 trillion and VNĐ27.2 trillion, respectively.
Despite the positive developments, the pressure of corporate bonds maturing in 2024 remains significant, especially in the real estate and renewable energy sectors.
Almost all bond issuers, mostly real estate developers, have announced late payment of principal and interest worth trillions of Vietnamese đồng.
Experts said the biggest concern of investors today when buying corporate bonds is ensuring the safety of their capital.
The violations of Tân Hoàng Minh Group and Vạn Thịnh Phát in the market, along with a number of real estate companies failing to pay principal and interest, have made investors cautious.
The problem is no longer about yields. Even if bond yields are raised, investors are still cautious. This is a common psychology that holds back transactions in the bond market, analysts said.
Outstanding corporate bonds were worth VNĐ1 quadrillion at the end of last year, with a total of VNĐ240 trillion of maturing bonds this year.
Trần Dục Thức, a professor at HCM City University, has warned of a spike in bad debt levels due to firms facing challenges in selling assets to service their debt or bond obligations.
The Government has taken steps to address these challenges, with the central bank allowing lenders to reschedule debt repayment for certain sectors for an additional six months.
The move aims to ease financial pressure on companies and support economic growth.
As of mid-June, credit growth has only increased by 3.79 per cent compared to the previous year-end.
Việt Nam has set a credit growth target of 5-6 per cent for the first half of the year and 15-16 per cent for the entire year.
Credit institutions are encouraged to prioritise lending to production, business, priority sectors, and key economic growth drivers.
