Public offerings key to promoting corporate bond market: experts
In addition to simplifying issuance regulations, experts also said that a comprehensive solution is needed to remove legal barriers and develop investor bases.
To promote the professional corporate bond market, one solution is to focus on widespread public offerings of corporate bonds rather than private placements, said experts.
This would involve improving legal regulations and encouraging companies to issue bonds to the public. The disclosure requirements should be further standardised and the issuance approval procedures should be simplified.
According to analysts from FiinRatings, the information disclosure for bond offerings should be improved by including additional assessment information regarding debt servicing capacity instead of the current emphasis on prospectuses of bonds offered in the market. Additionally, publicly offered bonds should be independently credit-rated following the practices of more developed bond markets in the region.
In particular, as proposed by analysts from FiinRatings, for publicly issued bonds by listed companies with high credit ratings, regulatory authorities may consider applying expedited approval or deemed approval methods. Alongside this, maintaining post-approval supervision mechanisms to limit violations is important.
Regarding private placements, the target audience of professional individual investors has been narrowed down according to the new regulations in Decree 65. However, if bonds are only privately offered to institutional investors, including banks, investment funds, insurance companies, pension funds and licensed entities, simplifying procedures for bondholder representation mechanisms should be considered.
Attracting institutional investors
In addition to simplifying issuance regulations, experts also said that a comprehensive solution is needed to remove legal barriers and develop investor bases.
Most bond-issuing companies in recent times have chosen private placements with commercial banks and professional individual investors as the main investors. Organisational entities such as insurance companies and bond investment funds have limited participation.
Meanwhile, in recent times, after unfavourable developments in the market, many commercial banks have gradually restricted investments in corporate bonds according to the regulations of the State Bank of Việt Nam (SBV) to control credit risks and ensure system safety.
Insurance companies are also restricted from investing in corporate bonds for the purpose of debt restructuring under the new Insurance Business Law, which came into effect at the beginning of 2024.
The report from FiinRatings indicates that the corporate bond market has experienced a significant decline due to violations in the market and changes in the regulations for private placements.
To develop the corporate bond market as an important capital-raising channel for businesses, alongside credit, Việt Nam needs to consider evaluating and revising regulations to align with international standards for medium and long-term financing.
The involvement of financial institutions, such as retirement funds, investment funds and government-managed investor groups like the Social Insurance of Việt Nam and the State Capital Investment Corporation (SCIC), is also crucial. These models have been successful internationally and can be considered for adoption in Việt Nam.
According to FiinRatings, as of February 5, 2024, the corporate bond market recorded four issuance transactions with a total value of VNĐ6.45 trillion from four companies. The outlook for the corporate bond market in 2024 is expected to be more vibrant than in 2023, with disciplined and tighter market development, along with recovering confidence.
Moody's forecasts that the Vietnamese corporate bond market will develop in a more disciplined and controlled manner in 2024, with continued recovery and increased confidence.
SaigonRatings suggests that the bond market has bottomed out and is showing signs of recovery due to positive factors such as clear signs of global economic recovery, stable economic growth, increased investment demand and renewed investor confidence.
In 2024, real estate companies in particular will need to raise capital for land acquisition and project development. Bonds remain one of the preferred channels for funding, although careful planning is crucial for many companies considering bond issuances.
The corporate bond market in Việt Nam is expected to undergo positive developments in 2024, driven by regulatory improvements, increased investor participation, and favourable economic conditions. — VNS
