Vietnam corporate bond exchange to be opened in July: Deputy PM

Vietnamese Deputy Prime Minister Le Minh Khai on Thursday asked the Ministry of Finance (MoF) to put into operation a corporate bond trading floor this month to get the market moving.

The MoF reported at a meeting to review its mid-year performance that the average bond trading volume in the first half of the year plunged by nearly 24% year-on-year, reaching VND5.87 trillion ($248 million) per session.

Decree 08, effective from March 5, 2023, serves as a legal basis to remove difficulties for businesses issuing bonds and paying those that are maturing, ensuring the interests of bondholders. It allows issuers to extend their bond maturities by up to two years and pay principal and interest with assets rather than cash.

The new decree has helped the bond market gradually warm up after nearly half a year of stagnation. In the first three months of 2023, businesses mobilized more than VND24.7 trillion ($1.05 billion) from the bond market.

The deputy PM requested the ministry to quickly deal with problems in the corporate bond and securities markets. "It is an urgent need to put into operation the corporate bond exchange in July," he stressed.

The exchange will unleash the market and create conditions for businesses to raise medium- and long-term capital for production and business activities.

The corporate bond market experienced overheated growth in 2020 and 2021 with an issuance value of nearly VND462 trillion ($19.66 billion) and VND658 trillion ($28 billion) respectively, according to the Vietnam Bond Market Association.

However, the market slowed after the mid-2022 arrests of real estate business leaders for bond issuance violations and improper use of mobilized capital.

Therefore, the opening of the exchange is an attempt to "break the ice" for this market, Khai said.

In June, the Vietnam Securities Depository (VSD) and the Hanoi Stock Exchange (HNX) developed a system to connect and synchronize investor information and accounts serving bond transactions on the trading floor, according to the MoF.

HNX said it has completed the first phase of the bond trading system, and prepared all necessary technical conditions for its official operation.

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.

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