New momentum for corporate bond market

New momentum for corporate bond market

There is a pressing need for a legal structure that allows companies to optimise their capital flow from bond issuance while simultaneously protecting the rights of bondholders.

The new regulatory framework proposes to allow companies greater flexibility in adjusting their use of funds raised through bonds. — Photo bnews.vn

Significant developments are underway in Việt Nam's corporate bond market as regulatory authorities work to create a more flexible yet disciplined legal framework.

The Ministry of Finance (MoF) and the State Securities Commission of Vietnam (SSC) are currently seeking public input to refine a draft decree that will replace existing regulations of Decrees 153/2020, 65/2022 and 08/2023.

This balanced approach aims to enhance the operational efficiency and transparency of the corporate bond market, thereby fostering sustainable growth.

The recent discussions among market participants highlight the pressing need for a legal structure that allows companies to optimise their capital flow from bond issuance while simultaneously protecting the rights of bondholders.

A representative from an infrastructure company shared insights about the challenges faced in securing funding, often due to legal hurdles that led to delays in project execution and hindered access to capital markets.

The new regulatory framework proposes to allow companies greater flexibility in adjusting their use of funds raised through bonds.

This initiative is seen as a crucial step towards alleviating one of the major bottlenecks facing businesses today—rigid regulations that restrict the use of raised capital.

The ability to redirect surplus bond capital to more lucrative investment opportunities could enhance financial efficiency and maintain investor confidence by ensuring timely interest payments.

Dr Nguyễn Hoàng Bình from RMIT University Vietnam told plo.vn that the proposed changes represent more than just technical adjustments. They could fundamentally influence investor confidence and market compliance.

In a cautiously recovering bond market, expanding companies' capabilities to adapt to market conditions is prudent, provided that robust investor protection mechanisms accompany these changes.

The proposed regulations would enable businesses to amend their original plans for bond capital usage, contingent upon obtaining the necessary approvals from corporate governance bodies and securing consent from bondholders representing over 65 per cent of the issued bonds.

Furthermore, mandatory disclosures concerning any changes in funding usage are required, ensuring transparency.

Nguyễn Hoài Thu, CEO of VinaCapital's Securities Investment Division, emphasised that the corporate bond market is essential for the sustainable development of the economy. In Việt Nam, this market remains relatively new and small, making up less than 10 per cent of GDP.

Following the crisis at the end of 2022, the market faced numerous challenges before beginning to recover. In 2024, the total value of corporate bond issuances is anticipated to rise impressively by 27 per cent compared to 2023. The outlook for 2025 is optimistic, driven by the government’s efforts to establish a robust legal framework and ongoing economic growth.

Corporate bonds are not risk-free investments and require careful analysis. For professional investors, investing in corporate bonds entails a comprehensive credit analysis process that demands high financial expertise in both quantitative and qualitative dimensions. It's not just about looking at the bond name, the issuing company, and the interest rate. Hence, individual investors who wish to engage in this market must proceed with caution, Thu said. 

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