Information disclosure key issue for corporate bond issuance

Tuesday, Jan 14, 2020 16:55

Bank notes are checked and counted. The volume of corporate bonds issued in 2019 alone was worth more than VND280 trillion, up 25 per cent year on year. — Photo

The main problem with corporate bond issuance is the quality of information disclosure, according to SSI Securities Corporation (SSI).

The total volume of outstanding corporate bonds was worth VND670 trillion (nearly US$29 billion) at the end of 2019. The figure was equal to 11.3 per cent of total GDP in 2019, up from 9.01 per cent in 2018.

Most of the deals were retail sales. Only 6 per cent of all deals were public issuance made by commercial banks, SSI said in its report on the 2019 bond market.

The volume of corporate bonds issued in 2019 alone was worth more than VND280 trillion, equal to 93.2 per cent of the total volume offered for sale and up 25 per cent year on year.

Commercial banks issued total VND115.4 trillion worth of bonds with 70 per cent of the figure being short-term, low-interest bonds.

Property firms issued VND106.5 trillion worth of bonds. Other sectors with high volume of issued bonds included energy and mining (VND13.2 trillion), non-banking financial institutions (VND10.4 trillion) and infrastructure firms (VND7.6 trillion).

The report was compiled on a total of 211 companies and 129 of the total are not listed, therefore, their transparency and accountability remain weak.

Most individual investors were domestic and they bought a total of VND26.5 trillion worth of bonds or 9.64 per cent of the total on the primary market. The figure may be higher as individual investors also bought in the bonds that had been issued on the secondary market.

The report shows companies were often short of key details regarding the purpose of the issuance and the corporate financial status before and after the deal, while the information of the deals was unclear.

According to SSI, some companies issued bonds in small retail packages to avoid disclosing information of the deal. In addition, the number of individual investors taking part in those deals increased but there was lack of policies to protect them.

But individual investors had limited access to the information of the companies and their bonds. They also did not have enough experience. — VNS

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