The market needs a support package on confidence

It is necessary to create the trust of the society in the private sector, and the trust of the private sector in the market. The private sector remains the hope-star of the economy.

The need to issue bonds to raise capital is huge

The corporate bond market is an important medium and long-term capital mobilization channel for enterprises to the Government's policy on balanced development between the capital market and the money and credit markets.

According to the Ministry of Finance, by the end of 2021, the size of the corporate bond market is about 16.6% of GDP after a hot growth in recent years. This number is still low compared to the target of outstanding loans in the corporate bond market of about 20% of GDP by 2025 set out in Resolution 54 on economic restructuring for the 2021-2025 period issued by the Government.

In terms of both ratio and volume, Vietnam's corporate bond market is still very small compared to the region. For example, Korea has outstanding corporate bonds accounting for 86.6%, in Malaysia 60% of GDP.

The need to issue bonds to raise capital is very large. Notably, of these, private bond issuance now accounts for more than 95.4%.

According to data from the Ministry of Finance, in 2021, the volume of privately issued bonds accounts for more than 95.1% of the total issued value in 2021, reaching VND 605 trillion. In the first quarter of 2022, the volume of private placement bonds continued to increase in proportion to the total issued value, accounting for more than 95.4%. 

Pham Phu Khoi, Vice Chairman of the Vietnam Bond Market Association (VBMA), said that the private placement bond market is very important, especially in the post-COVID-19 crisis period. Many businesses need to restructure and supplement long-term capital to develop production businesses, especially in the real estate sector.

The privately-issued corporate bond market will help businesses in crisis have tools to restructure capital and continue operating; does not lead to chain consequences on the banking system such as an increase in bad debt. It is also a tool for institutional investors specializing in venture capital to structure deals.

At the Conference "Developing a safe, transparent and effective capital market to stabilize the macro-economy and ensure major balances of the economy" held on April 22 in Hanoi, the VBMA said in a statement. Regarding the corporate bond market recently, several issuers and intermediaries have failed to comply with legal requirements.

In particular, recently, the issuance of corporate bonds has legal violations and the auction of land use rights has many shortcomings and potential risks. On April 5, 2022, the Investigative Police Agency of the Ministry of Public Security issued a decision to prosecute the case "Scam to appropriate property" that occurred at Tan Hoang Minh Group and related organizations and units. , conduct investigation and verify several acts with signs of law violation related to the issuance of bonds and the mobilization of money from investors of member companies of Transaction Trading Co., Ltd. Tan Hoang Minh hotel service.

Phenomena like Tan Hoang Minh cause negative news about the corporate bond market in the mass media. This makes investors' psychology bewildered and many individual investors have moved to sell their invested bonds, including good quality bonds, to reduce new investment... The primary and secondary corporate bond markets faced many difficulties.

In particular, real estate businesses are more difficult when they are restricted from borrowing capital from credit institutions. This can lead to the illiquidity of the corporate bond market, causing unpredictable consequences for the financial market in general.

It is worth noting that the risks of the corporate bond market have the potential of cross-contamination to banks and securities companies.

PhD. To Trung Thanh (National Economics University) said, about the risk of instability in the financial and monetary sector, the biggest concern is the debt market. Vietnam's corporate bond market as a percentage of GDP is not large compared to other countries, but it is risky because 40% of bonds are issued by real estate companies. The scale of issuance increased, but the interest rate of real estate corporate bonds was also at the highest level, up to 12-13%/year.

Nearly 30% of real estate corporate bonds have no collateral or are secured by stocks, so the quality of the collateral is poor and the level of risk is high. 80% of the issued bond value belongs to unlisted enterprises. Therefore, the company's ability to access information and transparency is very limited, and ambiguous information in the use of cash flows, as in the case of Tan Hoang Minh, leads to risks for buyers. Currently, Vietnam also lacks credit rating information in the debt issuance market.

The above risks of the corporate bond market pose a risk of cross-contamination to banks and securities companies because banks and securities companies of banks hold 74% of bonds of real estate enterprises. The stock market itself also has risks and uncertainties, reflected in the level of new individual investors, and lack of understanding of the record market. The number of listed companies is small, causing an imbalance between supply and demand while the quality is uneven. The situation of stock price manipulation has serious signs, negatively affecting market confidence and transparency. The bubble risk of the market is increasingly evident when the margin loan/equity ratio is at 130%.

PhD. Trung Thanh said that the company's ability to access information and transparency is very limited, and ambiguous information in the use of cash flows, as in the case of Tan Hoang Minh, leads to increased risks for buyers. Currently, Vietnam also lacks credit rating information in the debt issuance market.

The instability of the financial and monetary sector such as low credit quality, increasing bad debt, and an unhealthy stock market... will have the opposite effect on other areas, especially the influence on the growth and recovery potential of the economy.

The market needs a support package on confidence

According to Minister of Finance Ho Duc Phuc, the development of the corporate bond market must be sustainable to become an important capital mobilization channel for businesses; in which, focusing on developing a transparent secondary market, building market standards, and separating bonds issued to the public and issued privately.

In the immediate future, the Ministry of Finance will urgently submit to the Government to amend the regulations on private corporate bond issuance in Decree No. 153/2020/ND-CP, regulations on private corporate bond offerings and transactions of retail market in the domestic market and offer corporate bonds to the international market in the direction of rationally tightening and strictly managing securities companies issuing advisory services

Weak businesses are not released; narrowing down the target of mobilizing bonds to only serve the investment and implementation of projects; After issuing, enterprises must immediately notify the Stock Exchange and the State Securities Commission and regularly publish information on the use of money from bond mobilization.

According to Dr Tran Dinh Thien, the Government is aiming to not only recover but also develop the economy after the pandemic. If the bond market is not protected and is not further promoted, businesses will feel that an opening channel to access capital is about to be closed. Losing a large capital mobilization channel will be damaging to the economy. economy.

From another angle, Dr Vu Tien Loc, former Chairman of VCCI, said that a support package on trust is needed in the current situation.

Affirming that the arrest or prosecution of some members of the Tan Hoang Minh and Thu Thiem Group by the Chairman of the Board of Directors of FLC is not the common image of the private enterprise team, Dr Vu Tien Loc said that the law must be fair to the wrongdoers, but the public also needs to be fair and tolerant with the business team.

The dual impact of epidemics and wars leads to a decline in trust globally. Domestically, the shortcomings of the economy are becoming more evident. We are in a difficult situation.

"Now is the period of a global confidence crisis. Therefore, it is necessary to create the trust of society in the private sector, as well as create confidence in the market. The private sector is still the key to the economy", Mr Loc emphasized.

Affirming that the arrest or prosecution of some members of Tan Hoang Minh and Thu Thiem by the Chairman of the Board of Directors of FLC is not the common image of the private business team, Mr Loc said that the law must be fair. with wrongdoers, but the public also needs to be fair and tolerant with the business team.

Mr Loc also emphasized that maintaining trust in the market and institutions is very important for Vietnamese businesses. "True letters are at the heart of today's business moves, creating a driving force for development," he suggested.

In an environment with many risks and it is expected that in the future, there will still be many risks, Mr Loc said that improving risk management capacity is very necessary.

He also said that problems related to institutions need to be adjusted, such as there must be better management measures for the corporate bond market and the stock market.

"But don't jerk, don't suddenly, tighten, so that these markets are medium and long-term capital mobilization markets," Mr Loc noted.

Dr Vo Tri Thanh pointed out that the limitations that are being revealed in the corporate bond market are deeply rooted in opinion. "We have built good foundations, such as government bonds, while corporate bonds are superficial," said Mr Thanh.

Mr Thanh said that we need to be patient and have a long-term plan for the bond market more than the stock market 

"In the short term, supervision must be associated with rewards and punishments, in principle we do not criminalize economic relations, but must clarify the professionalism of individual and institutional investors," said Mr Thanh. 

Francois Painchaud, Chief Representative of the International Monetary Fund (IMF) in Vietnam affirmed that corporate bond tools are certainly very important in Vietnam's development, there will be growth and recession, but that are very common things.

He said that legislators and executives still need to exercise their responsibility to regulate the behaviour of market participants. However, in management and supervision, it should not be too tight that squeezing the market, nor too loose, causing many problems for the market. 

He recommended, first improving corporate governance, and improving accounting and auditing rules. Need to protect investors; Consolidation in the issuance of bonds to the public, especially the private placement of bonds; Develop credit rating agencies; Develop a team of professional investors who also have data to grasp the relationship between organizations in the system to control risks and detect risks.

The real estate market is not the only country that has witnessed an increase in prices, the difference is that Vietnam lacks data linkage, so there is a lack of understanding of pricing, supply, and transactions. Therefore, it is difficult to identify the risks involved. "We can learn from other countries how to control the unusual price increase in this region," said the IMF chief.

Phuong Anh