Credit rating not a hinderance, key to corporate bond market transparency: expert

By Nguyen Thoan, Minh Hue
Sat, July 13, 2024 | 8:15 am GMT+7

Credit rating is not a bottleneck hindering the development of Vietnam's corporate bond market. Rather, it is the key to making the market transparent, thereby enhancing investor confidence, said Phung Xuan Minh, chairman of Saigon Ratings, the first credit rating agency in the country.

Minh also sees positive signs of the country moving towards a transparent, sustainable bond market.

Phung Xuan Minh, chairman of Saigon Ratings. Photo courtesy of Voice of Vietnam.

Phung Xuan Minh, chairman of Saigon Ratings. Photo courtesy of Voice of Vietnam.

Regulations on credit ratings for private placement bond issuers in the government’s Decree 08 expired on December 31, 2023. What are some of the salient developments that have happened since?

On January 1, 2024, regulations requiring credit rating results for some bonds took effect. In addition to the VND11 trillion ($432.73 million) worth of bonds issued via public offerings, all with credit ratings, about 4.2% of the remaining VND110 trillion ($4.38 billion) of private placement bonds were also rated.

These are very positive signs of movement towards a transparent and sustainable bond market.

I see five main reasons for the corporate bond market’s recovery in the first six months of this year.

Firstly, market confidence has returned, gradually. The handling of two bond scandals involving real estate developers Tan Hoang Minh Group and An Dong Investment Group JSC, a subsidiary of Van Thinh Phat Group, has helped in this process. State management agencies have succeeded in preventing a system collapse.

Secondly, due to the drastic actions taken by authorities, market players were forced to rectify and begin complying with regulations. Consulting organizations became more responsible as they feared inspections by the Ministry of Finance. This also contributed to making the market healthier, boosting confidence among investors.

Thirdly, statistical data shows that the economy is recovering well and is forecast to be more positive in the remaining half of the year, leading to a rebound in capital demand.

Fourthly, the concerned ministries have basically removed the bottlenecks for many projects, also leading to increased capital needs.

Fifthly, some businesses who could not obtain bank loans without collateral have turned to mobilizing capital from bonds with attractive coupon rates of 10-12% per year.

Another observation I want to make is that credit rating has not been a ‘bottleneck’ hindering the bond market’s progress. The problem lies in investor confidence and economic recovery. The number of bonds that Saigon Ratings has rated in the first six months of this year is probably equal to the combined figure of the last five years.

So do you see better prospects for the corporate bond market in the second half of the year? Will stricter regulations in Decree 65 affect bond issuance activities?

At Saigon Ratings, we feel that the most difficult and challenging period for the corporate bond market has passed. Investor confidence has returned.

This time, with a lot of idle money and low bank interest rates, investors will want to switch from the deposit channel to bonds, particularly if they find it safe with the supervision and management of the government.

Demand in the economy is expected to be high in the last six months towards meeting the H2 credit growth target of 7-7.5%, not to mention businesses needing capital to meet export orders. The growth of public investment and real estate will push up the construction industry, which is very thirsty for medium and long-term capital.

As businesses have recovered and stabilized, a new cycle will come for the corporate bond market. Saigon Ratings has ranked many bonds and consulting companies are also preparing for a series of bond issuance plans in the third and fourth quarters of 2024.

I think that problems for the corporate bond market do not lie in the government's Decree 65. It has to do with the market. Identifying the real problems will help the market recover in the right direction.

It's encouraging that the rate of public offering of bonds has reached 9%, compared to the previous 4-6%. How can credit ratings help the bond market?

When the government issued Decree 65 in 2022, everyone thought that credit ratings would cause difficulties and hinder the bond market, affecting issuance volume and increasing costs for enterprises.

However, I think credit rating contributes to market transparency and promotes sustainable market development in accordance with good international practices.

Credit rating helps develop the corporate bond market in three aspects.

Firstly, it helps investors know which bonds are trustworthy and recognize whether a business is a ghost company or a backyard company of someone.

Secondly, credit rating increases information transparency in the market, thereby stimulating demand and making investors feel secure in switching from other investment channels to bonds.

Thirdly, it helps promote public bond offerings. This is in line with international practice.

The world encourages public offerings of bonds because they are strictly managed and of higher quality. In international practice, credit rating for bonds is mandatory for the first 2-3 years of operations.

Once a rating culture is established, it will become indispensable in the market. Any product that does not have a credit rating will be considered fake, counterfeit, or poor quality; and forced to offer higher coupon rates because of greater risk.

My assessment is that enforcement of Decree 65 will follow international practices. Let me repeat: credit rating will help increase investor confidence as well as the evaluation of investments according to investors' risk appetites. Businesses will not incur costs…In fact, high credit ratings will help good businesses reduce capital costs.

According to the Ministry of Finance, a total of 41 businesses in Vietnam issued VND110.2 trillion ($4.34 billion) worth of private placement corporate bonds in the year to June 21, 2.6 times more than the same period in 2023.

Of the total, credit institutions accounted for 63.2% (VND69.6 trillion or $2.74 billion) and real estate businesses 28.6% (VND31.5 trillion).

The average coupon rate was 7.41% per year and the average issuance term was 3.78 years. About 14.5% of issued bonds were based on collateral.

Comments (0)
  • Read More
Vietnam mulls opening door for private investment in small modular reactors

Vietnam mulls opening door for private investment in small modular reactors

Vietnam’s Ministry of Industry and Trade has drafted a parliamentary resolution that, for the first time, would allow private companies to participate in the development of small modular nuclear reactors (SMRs).

Energy - Fri, October 17, 2025 | 4:37 pm GMT+7

Kido seeks buyer for remaining 49% stake in frozen food affiliate

Kido seeks buyer for remaining 49% stake in frozen food affiliate

Kido Group (HoSE: KDC), a leading food company in Vietnam, has approved a plan to divest the firm's remaining 49% stake in its affiliate Kido Frozen Food JSC (Kido Foods).

Companies - Fri, October 17, 2025 | 4:25 pm GMT+7

Le Ngoc Quang appointed Danang city's Party chief

Le Ngoc Quang appointed Danang city's Party chief

Le Ngoc Quang, a Party Central Committee member and Party chief of Quang Tri province, has been appointed Party chief of Danang for the 2025-2030 term - the highest position in the city, central Vietnam's economic hub.

Politics - Fri, October 17, 2025 | 4:17 pm GMT+7

T&T Group seeks to reshape north-central Vietnam’s urban landscape with major projects

T&T Group seeks to reshape north-central Vietnam’s urban landscape with major projects

Multi-sector conglomerate T&T Group is developing a model eco-urban complex in Ha Tinh province and plans to build a massive 236-hectare urban area in neighboring Nghe An, with an aim to reshape north-central Vietnam's urban landscape.

Investing - Fri, October 17, 2025 | 2:44 pm GMT+7

Toyota plans $359 mln plant expansion in northern Vietnam

Toyota plans $359 mln plant expansion in northern Vietnam

Toyota Motor Vietnam (TMV) plans to invest about VND9.46 trillion ($359.2 million) in the first phase of its plant expansion project in Phu Tho province.

Investing - Fri, October 17, 2025 | 2:09 pm GMT+7

PVI Insurance sees 9-month profit before tax more than doubling

PVI Insurance sees 9-month profit before tax more than doubling

PVI Insurance has reaffirmed its position as the No. 1 non-life insurer in Vietnam, with total revenue increasing nearly 1.4 times in the first nine months of 2025 and pre-tax profit more than doubling year-on-year - surpassing its full-year targets for both revenue and profit.

Companies - Fri, October 17, 2025 | 9:08 am GMT+7

Vingroup to develop 4,600ha coastal urban project in northern Vietnam

Vingroup to develop 4,600ha coastal urban project in northern Vietnam

A consortium of Vingroup (HoSE: VIC) and its real estate arm Vinhomes (HoSE: VHM) will develop a 4,600-hectare coastal urban complex in Ha An ward, Quang Ninh province, following local authorities’ approval of a zoning plan.

Real Estate - Fri, October 17, 2025 | 8:30 am GMT+7

Indonesia resumes int’l carbon trading after 4-year hiatus

Indonesia resumes int’l carbon trading after 4-year hiatus

Indonesian President Prabowo Subianto has issued a new decree to restart international carbon emissions trading after a four-year hiatus.

Southeast Asia - Thu, October 16, 2025 | 9:23 pm GMT+7

Investors seek 2-year delay for $2.56 bln LNG power project in northern Vietnam, citing equipment hurdles

Investors seek 2-year delay for $2.56 bln LNG power project in northern Vietnam, citing equipment hurdles

Investors of a $2.56 billion LNG-fired power plant in Hung Yen province have proposed delaying the project’s commercial operation schedule by two years due to difficulties securing key equipment.

Energy - Thu, October 16, 2025 | 9:04 pm GMT+7

Vietnam to soon raise taxpayers' personal deduction: official

Vietnam to soon raise taxpayers' personal deduction: official

The personal income tax deduction in Vietnam is "very likely" to increase to VND21.7 million ($823,940) per month, including VND15.5 million (588,530) for the taxpayer and VND6.2 million ($235,410) for each dependent.

Finance - Thu, October 16, 2025 | 6:25 pm GMT+7

Business confidence climbs as reforms gain traction amid global headwinds: EuroCham Vietnam

Business confidence climbs as reforms gain traction amid global headwinds: EuroCham Vietnam

The index climbed to 66.5, surpassing pre-tariffs level and reaching its highest in three years – showcasing resilience and adaptability amid global headwinds and evolving U.S. tariff pressures.

Economy - Thu, October 16, 2025 | 4:36 pm GMT+7

Vietnam's stock market watchdog suspends two Grant Thornton auditors

Vietnam's stock market watchdog suspends two Grant Thornton auditors

Vietnam's State Securities Commission (SSC) has suspended two auditors from Grant Thornton Vietnam after determining that the 2024 audited financial statements of Saigon Water Infrastructure Corporation (HoSE: SII) failed to meet required standards.

Finance - Thu, October 16, 2025 | 3:35 pm GMT+7

Law No. 56 a major policy breakthrough for Vietnam's stock market development

Law No. 56 a major policy breakthrough for Vietnam's stock market development

The Law No. 56, effective January 1, 2025, is one of the major legal breakthroughs in recent years that will enhance the transparency and operational efficiency of the Vietnamese stock market.

Finance - Thu, October 16, 2025 | 2:30 pm GMT+7

WHA Group breaks ground on smart technology industrial zone in central Vietnam

WHA Group breaks ground on smart technology industrial zone in central Vietnam

Thailand's WHA Group on Tuesday broke ground on a world-class, modern, and environmentally friendly industrial zone in central Vietnam, namely the WHA Smart Technology Industrial Zone-Thanh Hoa.

Real Estate - Thu, October 16, 2025 | 2:00 pm GMT+7

Vietnam a key partner in Murphy Oil’s global strategy: exec

Vietnam a key partner in Murphy Oil’s global strategy: exec

Vietnam remains a key partner in Murphy Oil’s global business strategy, said Eric Hambly, the U.S. corporation's president and CEO.

Companies - Thu, October 16, 2025 | 12:06 pm GMT+7

VNPT, Qualcomm debut Vietnam’s 1st original design-based excellence center

VNPT, Qualcomm debut Vietnam’s 1st original design-based excellence center

State-owned Vietnam Posts and Telecommunications Group (VNPT) and Qualcomm have officially launched the VNPT-Qualcomm Excellence Center (VQEC), the first facility in the country to operate under an original design co-development model using Qualcomm’s core technologies.

Companies - Thu, October 16, 2025 | 8:41 am GMT+7