Corporate bonds in Vietnam recover strongly in Q1 as issuance rules eased

The issuance of corporate bonds in Vietnam expanded nearly 640% in Q1/2023 compared to Q4/2022 thanks to easier rules, the Asian Development Bank (ADB) said in its Asia Bond June 2023 report.

The government responded to the turmoil in the local real estate market and challenges derived from its Decree 65/2022 on corporate bond issuance via private placement by issuing Decree 08/2023 on March 5. Decree 08 amended terms in Decree 65, easing pressures on corporate bond issuers.

The new decree came amid credit tightening policies and high bank interest rates. The corporate bond market picked up the pace instantly as 93% of Q1 bond issuances occurred in March, the ADB noted.

Seven realty firms accounted for 85.3% of corporate bond issuance in Q1/2023 after the government loosened regulatory restrictions, according to the bank.

Vietnam’s local currency bond market grew 5.1% to $111.9 billion at the end of March 2023 from end-2022, of which corporate bonds accounted for 28%, it said.

Treasury and other government bonds made up the biggest portion of 67.8%, while a 4.2% share was attributable to central bank securities.

Vietnam's bond market was the smallest among emerging East Asian nations. Mainland China and Japan were the two biggest ones with $18,957 billion and $10,174 billion, respectively, while the next-to-last market was the Philippines with $212 billion.

In Q1/2023, financial institutions and property firms were the biggest issuers of corporate bonds in Vietnam, accounting for 53.8% and 25.5%, respectively.

In the period, Vietnam recorded some defaults amid stress in the corporate bond market, especially in the real estate sector, the ADB stressed. According to data of local domestic credit ratings agency FiinRatings, in the year to March 17, total default value of corporate bonds reached VND94.4 trillion ($4 billion), from 69 issuers. The real estate sector accounted for the largest share of VND78.9 trillion ($3.35 billion), or 83.6%.

Bond issuance in Vietnam in Q1/2023 increased 73% from Q4/2022 to VND938.4 trillion ($39.9 billion). Of which, treasury and other government bonds grew 15.9% to VND121.4 trillion ($5.16 billion), accounting for 12.9%. Central bank securities made up the largest share of 84%.

For government bonds, insurance companies and banks continued to account for nearly all outstanding bonds as of end-Q1/2023. Insurers were the largest holders with 57.8% of the total, followed by banks with 41.7%, and investment funds and other companies with less than 1%.