Bond negotiations four times more effective

By Minh Son   December 5, 2023 | 03:07 pm PT
Bond negotiations four times more effective
Nguyen Hoang Duong (right), deputy director general of the Department of Banking and Financial Institutions, and Phan Duc Hieu (left), standing member of the National Assembly’s Economic Committee. Photo by VGP
The percentage of successful negotiations between late-paying businesses and bondholders has increased to 63% in October from 16% in February.

At a talk show hosted by the Vietnam Government Information Gateway on the issue on Monday, Nguyen Hoang Duong, Deputy Director General of the Department of Banking and Financial Institutions, also said that some businesses have opted to buy back the bonds before maturity.

One of the factors boosting the success rate is a new regulation that "creates a mechanism for businesses and investors to negotiate, delay and switch bonds to share the risks and benefits between both sides," Duong claimed.

The Vietnam Bond Market Association, which assists and protects the rights of investors in the bond market, says over 60 bond issuers have successfully postponed bond payments as of Oct. 27.

Securities firm VNDirect estimates the total value of extended bonds to be VND107 trillion. Finance ministry officials have also commented that new bond issuances are going well with the number of bonds issued constantly increasing from Q2 to date.

By the end of November, 77 businesses had issued bonds worth VND220 trillion in total value. Nguyen Ngoc Anh, CEO of fund management company SSIAM, believes the current conditions mean the bond market has "safely landed" after its crisis period in late 2022.

An expert from SSIAM claims the bond market, like other markets, must go through a period of development then hit a bump on the road before policies and regulations are adjusted for the better.

"These bumps are necessary. Looking at neighboring countries, before their bond markets reached the current stage, they encountered many issues," Anh said, noting that the market has gone through a rough year and might see growth in 2024.

Dr. Can Van Luc, chief economist of state-owned bank BIDV, reassures investors that the market still has room for growth as its role in Vietnam’s economy is still relatively small compared to other countries in the region.

Currently, the ratio of bond debt to GDP is 13% for Vietnam, while it is 27% for Thailand and 22% for the Philippines.

"The more important task is to strengthen the market. Bond issuers need to improve their business management."

Phan Duc Hieu, a standing member of the National Assembly’s Economic Committee, commented that fraudulent bond cases create an opportunity for credible bond issuers to win investor confidence.

Bond issuers and financial intermediaries on the market should strive for higher standards than just the bare minimum set out by regulations.

"The law may not require it, but if businesses can do better, they should for their own benefits and for the benefit of the market," Hieu concluded.

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