Lawmakers ask government to clarify responsibilities in capital market problems

The National Assembly Economic Committee has asked the government to identify which state agencies have to assume responsibility for recent turbulence in the domestic bond, stock and real estate markets.

Vu Hong Thanh, chairman of the committee, made the request Thursday after a government report on the socio-economic situation in the country was presented to the legislative body at its year-end meeting.

Thanh was referring to recent scandals related to Tan Hoang Minh Group and investment firm An Dong, a subsidiary of Van Thinh Phat Group.

The cases have had many consequences for sustainable development of the capital market, betraying public trust and hurting people and investors, he said.

"It is necessary to clarify responsibilities of state management agencies, and to carefully and accurately assess their impact to have appropriate solutions to ensure safe, healthy and sustainable development of the monetary and capital markets," Thanh said.

Truong My Lan, chairwoman of HCMC-based property developer Van Thinh Phat Group, was arrested October 8 for alleged fraud in the issuance and trading of corporate bonds in 2018 and 2019.

In April, Do Anh Dung, chairman of property developer Tan Hoang Minh Group, was detained for alleged fraudulent appropriation of property via bond issuances. In March, Trinh Van Quyet, chairman of FLC Group, one of Vietnam's leading real estate developers, was arrested on charges of “manipulating” and “concealing information in securities activities”.

Thanh said Vietnam’s benchmark VN-Index had dropped 34% as of October 11 compared to this year’s peak on January 6, the deepest plunge among the world’s stock markets. Both HNX-Index and UPCoM-Index, which represent the Hanoi Stock Exchange and the Unlisted Public Company Market, also recorded their two-year lows.

Meanwhile, the corporate bond sector has witnessed an overheating period amidst a lack of transparency and many private placements for inappropriate purposes, he noted.

Thanh’s appraisal report said real estate firms with high financial leverage and poor financial health could face difficulties making payments when their debts or bonds become due.

He further noted that their short-term bonds generally mature in 3-4 years, while it often takes a real estate project 5-10 years to recoup their investments. The property market had heated up in the early months of the year, causing “fake fevers” and posing risks to the capital market and the banking system.

Thanh also mentioned global uncertainties that could negatively affect forex and interest rates in Vietnam, as well as generate non-performing loans (NPL).

As of July, the on-balance NPL ratio was 1.7%, while the ratio of bad debts and debts likely to become NPLs at domestic banks was 5.4%, lower than the 6.3% recorded at the end of 2021.