Bond risks to Vietnam’s credit system very low: data firm

Corporate bond risks to Vietnam’s credit system remain very low, says FiinGroup, a leading Vietnamese financial data provider.

According to a FiinGroup report, outstanding corporate bonds were valued at VND1,300 trillion ($53.05 billion) as of September 30, equivalent to 13% of Vietnam's GDP in 2021.

VND908.8 trillion ($37.09 billion) was bonds of non-banking businesses, of which VND455 trillion ($18.57 billion) came from real estate issuers, accounting for only 4% of the Vietnamese banking system's credit balance.

Moreover, many property developers boast good financial health and can pay their debts, the report notes.

Meanwhile, neighboring China recorded outstanding bonds worth $8 trillion, equivalent to 44% of its GDP, but the default rate was only 1.35%, a problem fixed within two years.

“Therefore, the risk of bond default in the Vietnamese market is visible but very low,” it says.

In addition, bond repurchase by non-banking businesses in the first nine months of the year increased by 2.34 times compared to the same period last year, reaching VND75.5 trillion ($3.08 billion). This has contributed to reducing bond debt pressure.

Banks currently hold VND284 trillion ($11.6 billion) worth of non-banking corporate bonds, accounting for 2.37% of total earning assets counted on June 30.

According to FiinGroup, this is not a big problem for bank credit quality because the corporate bond scale is small and quality of bonds carefully evaluated by banks. "The impact could only be greater for some banks with corporate bond credit higher than 10% of their total credit balance."

The Vietnamese corporate bond market has fallen increasingly quiet, especially after the recent arrests of some business leaders relating to violations in the issuance of corporate bonds, including chairman and general director of Tan Hoang Minh Group Do Anh Dung and Truong My Lan, founder and chairwoman of Van Thinh Phat Group.

The total value of corporate bonds issued in September reached VND16.1 trillion ($657.3 million), down 18.27% from the previous month and down 76.44% over the same period last year.

Of this, credit institutions continued to take the lead with 22 issuances, with a total value of VND10.2 trillion, representing a month-on-month decline of 40.2% and accounting for 63% of the total offered value. Real estate came second with VND2.8 trillion, up 55.6% from the previous month.

In the first nine months, the total value of corporate bond issuances plunged to VND246.32 trillion ($10.06 billion), equivalent to 35.87% of the entire 2021's figure. Of this, 58% came from credit institutions and 21% from real estate businesses.

Public offerings accounted for only 3.87% of total bond issuances, with the remaining via private placements.