Intake cash flow of 5 million billion dongs deposited in investment bank into bonds

DNHN - According to the General Secretary of the HH Vietnam Bond Market, the total amount of deposits in the banking system exceeds 5 trillion dongs. To attract cash flow, the TP market in particular, and other types of financial assets, in general, require

The bond market declines by over 90%

Ms. Nguyen Thi Hang Nga, CFA, Deputy General Director of Vietcombank Fund Management Company (Mrs. VCBF), assessing the bond market in the first months of 2023, as discussed on the VTV talk show Finance Street Talk Show, believes there have been positive signs on the secondary market, but the primary market is still very quiet due to demand factors.

"First, banks and insurance companies are no longer permitted to purchase issued bonds to restructure debt. In the past, securities firms purchased corporate bonds to distribute to individual investors, whereas today they have almost no need for individual investors. In the meantime, the fund management company, which is partially invested from the fund and partially as an investment trust by individual investors, has virtually no new cash flow. Regarding the requirements of foreign investors, Ms. Nga stated that a small number of foreign investors have begun to pay attention to the Vietnamese bond market.

Mr. Do Ngoc Quynh, General Secretary of the Vietnam Bond Market Association (VBMA), also stated that compared to the same period last year, the bond market's excitement has decreased by more than 90% this year.

According to Mr. Quynh, after a period of market volatility, market sentiment has been affected by the arrest of issuers' leaders to investigate legal violations. However, until now, after some time, investors have reshaped the information, become more cognizant, and are no longer in a rush to sell bonds at any cost. This is a positive initial indicator and a good opportunity for legitimate businesses to recover gradually and ensure their investors' debt repayment capacity.

In addition, Mr. Quynh stated that in the majority of nations, the corporate bond market is reserved for professionals and not amateurs.

"This is not to say that there is no risk for professional investors. When choosing such investment products, options, or investment strategies, professional investors are aware, comprehend, and accept the associated risks. In general, we all need to continue learning and enhancing our knowledge, and if investors recognize this, they can join," he explained.

Ms. Nguyen Thi Hang Nga concurred that the corporate bond market is not suitable for individual and inexperienced investors.

"In the past, many investors still equated investing in corporate bonds with going to the bank, but the two are quite distinct. To obtain a return that is 3-4% higher than a whole bank deposit, the investor must take on a significant amount of risk and may not receive the entire principal or only a portion., or delayed repayment...then it's also a pretty big risk about the profit it brings," Ms. Nga said.

Policy modifications are required

Ms. Nga, predicting the market in the future, stated that the market situation improved when deposit interest rates fell. Consequently, investors will be required to seek out investment opportunities with higher interest rates, including a return to bond investments.

"In actuality, individual investors are the source of capital on the market, regardless of the organization involved. When individual investor confidence has not fully returned, market demand will remain low because restoring trust takes time, as Nga explained.

According to the General Secretary of the VBMA, there are always investors looking for investment opportunities that match their understanding and risk appetite, not only in Vietnam but also in all countries around the world.

Even after the recent events, the amount of residential deposits in the commercial banking system alone is still over 5 trillion VND. Mr. Quynh explained that to attract cash flows from investors in the bond market in particular and other types of financial assets in general, adjustments must be made to the policy for receiving investors and the knowledge and behavior of market participants.

According to Ms. Nguyen Thi Hang Nga, the total credit in the nation has surpassed 130%, so the need for long-term capital via the bond market for business development is very great. Therefore, developing professional bond investment funds is the most fundamental and long-term solution.

In addition, according to Ms. Nga, the government can provide tax incentives; the State Bank must also consider the refinancing mechanism when investment funds experience liquidity issues...

"It is hoped that the government will allow funds to be invested in privately issued bonds, as well as bonds issued to the public or listed bonds because shortly, bonds issued privately will be the only viable investment option." Individual funds will also be registered for centralized trading at the Hanoi Stock Exchange (HNX), and this expansion will assist the funds in mitigating risk and diversifying their portfolios. She stated that issuers should appropriately balance their capital structure and only issue bonds when their investment projects are effective and require transparency.

PV (Synthesis)