Corporate bond market cools down

The Hanoi Stock Exchange (HNX) says in its latest report that 90 new issues of corporate bonds worth a combined VND24.6 trillion ($1.06 billion) were registered in September. Of these, only 30 were successful, the lowest single-month figure since the beginning of the year.

Registered issues this month were mainly for bonds with 2, 3 and 7-year maturity periods. The total value of funds raised, through the 30 successful issues, was VND10.5 trillion, only higher than February, the month after Lunar New Year, Vietnam’s longest national holiday when the country took a 7-day break.

Credit institutions accounted for 90.2 percent of total funds raised. Institutions that raised the most from bond issuances were state-owned banking giant Agribank, with VND2 trillion in 7-year bonds, private lender SHB with VND2 trillion in 2-year bonds, and private lender VIB with VND1.5 trillion in 3-year bonds.

The real estate sector, which prior to September had always accounted for at least 30 percent of bond issues, only registered 1.43 percent of total issued value that month, the HNX report says.

It also says that the sharp drop in bond issues likely stemmed from a new decree revising corporate bond issuance regulations that took effect September 1.

The decree effectively limits companies to no more than two bond issuances a year. It stipulates that companies may only issue bonds six months after the previous issue is completed, and an issuance must be completed within 90 days from when it is publicly announced.

Corporate bond transfers are also restricted now to 100 times in the first year, a stipulation that seeks to improve the quality of bonds issued that has made corporates reluctant to issue them.

Further, businesses that needed to raise capital to restart their post-Covid-19 operations had already raced to issue bonds before the new decree took effect. Total capital raised thus in the past few months soared to high levels, sometimes exceeding VND125 trillion.

In the first nine months of this year, Vietnamese companies successfully carried out 1,660 bond issues, raking in approximately VND304 trillion.

Since the end of 2019, the Finance Ministry has also been issuing warnings about the potential risks of investing in bonds and telling retail investors "not to purchase bonds just because of high interest rates."

Economist Nguyen Tri Hieu says these moves seek to address the risk of companies issuing bonds with higher coupon rates than their previous issues just to pay off bank debts or redeem bonds that have matured.