The State Securities Commission of Viet Nam (SSC) was actively implementing the corporate bond scheme to make the local corporate bond market work next year. — Photo thitruong.edu.vn

HA NOI (Biz Hub) — The State Securities Commission of Viet Nam (SSC) was actively implementing the corporate bond scheme to make the local corporate bond market work next year, said SSC's Deputy Chairman Nguyen Thi Lien Hoa.

Hoa made the remarks while attending an evaluation meeting for bond markets in the first half of 2016 in Ha Noi, adding that over the next six months, the SSC would issue relevant decrees to develop the market as well as a legal framework for developing credit qualified rating units for corporate bonds.

Finance and banking expert Nguyen Tri Hieu said the active participation of enterprises and credit institutions would motivate the market. To promote the development of the corporate bonds market, Hieu said, Viet Nam needed reputable credit rating firms as well as better transparency of financial statements.

Hieu added as corporate bonds had a certain level of risk, the risks could only be stated out loud with reputable credit rating organisations or the bond market would remain sluggish.

Chief Executive Officer of OCB, Nguyen Dinh Tung said with corporate bonds, transparent information played an important role for the development of the market as it was the basic knowledge from the issuers that investors can rely on for their investments.

According to the Ha Noi Stock Exchange (HNX), the local corporate bond market has experienced remarkable development. By 2015, the market size was estimated at more than VND42.7 trillion (US$1.9 billion). Six years ago, the market size was recorded at VND30 trillion.

However, the development of the corporate bond market is still slow. It now accounts for 2.5 per cent of GDP. Compared to the average ratio of 21.7 per cent of GDP in ASEAN+3 countries, it is still too low. Among regional countries with the highest rates as of June, 2014, corporate bonds value reached 16.78 per cent of GDP in Japan, 74.76 per cent in Korea and 42.29 per cent in Malaysia.

Also at the meeting, HNX said the fact that 99 per cent of corporate bonds were privately placed contributed to the slow development of the market, as investors did not have the opportunities to buy the bonds.

The private placement of corporate bond in the US was 12 percent while the rate in Germany was 10 per cent and in Korea it was 0.4-15 per cent.

Tong Minh Tuan from Vietcombank Securities Company's HCM City branch, said that private issuance was good for the local market at these early stages of the market, especially as there wasn't a rating unit for the market yet. Tuan added that buyers of bonds must be responsible for rating the issuers to best protect their property, thus, they should have the most accurate assessment of the capacity and confidence of the issuers.

Tuan also said the issuance of corporate bonds could help corporations to create capital for their development, especially in merger and acquisition (M&A) activities that require a large amount of money all at one time. M&A continues to be a hot trend with no sign of slowing down in Viet Nam.

Tuan said while Circular No. 36 of the State Bank of Viet Nam did not allow banks to buy bonds to fund M&A activities, it did not prohibit funds and securities companies investing in the field. Thus, Tuan said, "The corporate bond market will continue to grow strongly." — VNS