Corporate bond market remains stagnant in early 2024

Tuesday, Mar 12, 2024 11:23

A stalled construction site in District 1, developed by Tân Hoàng Minh Group. Many issuers, particularly property developers, have already struggled to meet their bond redemption obligations. — VNS Photo Bồ Xuân Hiệp

The corporate bond market has remained stagnant in the first few months of 2024 due to a series of scandals and legal issues, particularly the arrest of the chairwoman of Vạn Thịnh Phát at the end of 2022.

No corporate bonds were issued in January, and only a few private corporate bond issuances were reported last month, totaling VNĐ1.17 trillion (US$), or 60 per cent of the same period last year, according to a report by the Việt Nam Bond Market Association.

The Hải An Transport & Stevedoring JSC last month successfully issued VNĐ500 billion worth of bonds at a fixed interest rate of 6 per cent per year, only slightly higher than the current deposit interest rate.

The Hà Nội Highway Investment and Construction JSC and Lạc Hồng Voyages raised VNĐ550 billion and VNĐ115 billion, respectively, with interest rates of around 10 per cent per year.

In addition, some companies have rushed to repurchase bonds before maturity, totaling almost VNĐ4.3 trillion worth of bonds as of March 10.

Numerous bond issuers, mostly major real estate developers, have missed interest payment deadlines on both domestic and foreign bonds, leading to a standoff with international creditors.

Around VNĐ255.7 trillion in bonds will mature in the remaining months of the year, with real estate companies accounting for a 38.4 per cent cumulative rate per year, putting great pressure on the issuers.

The government and financial regulatory agencies have implemented stricter regulations and oversight in a bid to restore faith in the market.

Following a recent Government decree, stricter regulations for issuances, criteria for professional individual investors, and credit rating requirements are expected to slow down the market.

Cấn Văn Lực, a member of the National Financial and Monetary Policy Advisory Council member, said new regulations in the decree will contribute to a more transparent corporate bond market in the long term, but apply pressure on companies in the short term.

Analysts believe that market participants may take some time to adapt to the new regulations.

Experts have attributed the stagnant market to a long-running anti-corruption campaign that the Government stepped up at the end of 2022.

The arrest for financial fraud of Trương Mỹ Lan, 68, chairwoman of Vạn Thịnh Phát Group, in October 2022 is considered as a turning point after which investor confidence dropped.

Prime Minister Phạm Minh Chính has blamed multiple agencies, including the central bank, Ministry of Finance and the State Securities Commission, for their weak management that led to ongoing problems.

Economic expert Dr. Đinh Trọng Thịnh warned it would take time for investors to regain confidence amid the scandals.

He recommended investors carefully select issuers with clear business strategies and reputable distributors. — VNS

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