Vietnam bond market underdeveloped, growth opportunities galore: experts
While the value of Vietnam’s corporate bond market is below 10% of the national GDP, the market has witnessed several positive developments in the first half of this year and teems with growth opportunities.
Pham Duc Son, editor-in-chief of The Investor, said this in opening remarks at a workshop organized Friday by the publication on sustainable and professional development of Vietnam’s corporate bond market.

A workshop on Veitnam's corporate bond market organized by The Investor, Hanoi, August 16, 2024. Photo by The Investor/Trong Hieu.
He noted that the market has seen a fair share of ups and downs since mid-2022, like the discovery of many violations that badly hurt investor confidence, so much so that no transactions were recorded for a while.
However, the violations were strictly handled and the market has been gradually recovering since the beginning of this year. According to the Ministry of Finance, 41 businesses issued private bonds worth VND110.2 trillion ($4.4 billion) in the first half of this year, up 2.6-fold year-on-year.
In December 2023, Prime Minister Pham Minh Chinh approved a development strategy until 2030 for the stock market that targets the corporate bond market reaching 20% of the GDP in 2025 and 25% in 2030.
To meet this target, Vietnam has to mobilize VND370 trillion ($14.77 billion) of new corporate bonds annually for the next eight years, which means growth opportunities aplenty for businesses and investors.

Pham Duc Son, editor-in-chief of The Investor. Photo by The Investor/Trong Hieu.
However, many challenges remain, Son said, pointing out that a large amount of corporate bonds would mature and become overdue in Q4/2024 and 2025, carrying the risk of delayed payment and above market average bad debts, in particular on issuances by real estate firms.
Another issue was private placement bond issuance accounting for a major portion of the market, with issuance to the public making up just 9.09% in H1/2024, posing liquidity problems.
Meanwhile, commercial banks are buying the bulk of corporate bonds issued, with institutional investors like funds, insurers and securities companies accounting for a minor proportion, he added.
30% of GDP
Hoang Van Thu, vice chairman of the State Securities Commission (SSC), said at the workshop that the corporate bond market was stabilizing after a period of stagnation. In the first seven months of 2024, the market recorded 183 sucessful issuances worth VND174 trillion ($6.94 billion), up 2.78-fold year-on-year, he noted.
He said the SSC was drafting strategies to develop the corporate bond market per the government's plan of pushing its value to 25% of GDP in 2025 and 30% in 2030.

Hoang Van Thu, vice chairman of the State Securities Commission (SSC). Photo by The Investor/Trong Hieu.
The SSC was also drafting amendments to Decree 155 on implementation of the Securities Law, aiming to facilitate private placement bond issuances to professional individual and institutional investors. This step aimed to solve the problem of most market violations being related to investors with lesser information.
The commission was also planning changes to facilitate financial rating of bond issuers and let consultants replace state agencies in checking bond issuance applications, Thu said.
Improved transparency, management
Speaking at the workshop, To Tran Hoa, deputy head of stock market development department under the SSC, highlighted authorities' efforts to improve market conditions.
In July 2023, a trading platform for corporate bonds began operating as part of the Hanoi Stock Exchange (HNX), demonstrating authorities' determination, despite the challenges of unstable financial strength of bond issuers and weak transparency, leading to the risk of inability to repay bond buyers and investors.

To Tran Hoa, vice head of stock market development department, under the SSC. Photo by The Investor/Trong Hieu.
Hoa said the failure of many businesses to repay their debts in time has hurt investors' confidence and the situation was worsened by the weak performances of many firms. In 2023, according to an HNX report, 139 firms did not repay interest and principal totaling VND83.6 trillion ($3.34 billion) in time.
Limited capacities of intermediaries in bond issuances have also hurt the market, leading to abuse of legal loopholes and wrongful mobilization of customers' deposits for bond purchases.
Despite authorities' efforts, major violations by Van Thinh Phat and Tan Hoang Minh pushed down the market and weakened investor confidence.
For future development of the bond market, Hoa suggested compulsory credit ratings for bond issuers, encouragement of green bonds, diversity of bonds and improvements in management.
Empowered investors
In presenting his analysis of the corporate bond market, Can Van Luc, chief economist with state-controled bank BIDV, suggested that investors improve themselves to make better investment decisions by accessing updated information from funds, securities firms and banks.

Can Van Luc, chief economist with state-controled bank BIDV. Photo by The Investor/Trong Hieu.
Luc also suggested that bond issuers diversify their capital sources, proactively conduct credit ratings, improve corporate governance, boost transparency, and pay more attention to green bonds.
For their part, authorities should improve bond market infrastructure and facilitate investors and bond issuers in upgrading their capacities, Luc said.
He recommended a focus on restoring investors' confidence in 2024-2025 and updating the legal framework until 2030.
Credit rating ‘trend’
Nguyen Quang Thuan, CEO of domestic credit ratings agency FiinRatings, said credit rating has a long development history of over a century, but remains underdeveloped in Vietnam.
It is unfair that foreign credit rating agencies rate Vietnamese businesses per foreign standards because Vietnamese firms operate at a "different" scale, he said.

Nguyen Quang Thuan, CEO of FiinRatings. Photo by The Investor/Trong Hieu.
To attract investors, especially institutional investors, Vietnam should develop its "soft" infrastructure such as trading platforms that meet international standards, Thuan said.
Meanwhile, Vietnam should discourage individual investors from buying private bonds, he added.
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