According to data of Bao Viet Securities Company (BVSC), the new issuance of corporate bonds in April reached 30.121 trillion dong, approximately 35.55 trillion dong in Q1/2020. After very low issuance in Q1, banks returned to issuing a relatively large number of bonds in April. Specifically, banks had mobilised more than 14.4 trillion dong with an average term of 4.4 years. This number increased sharply compared to 940 billion dong issued Q1.
Accordingly, banks accounted for 47.83 percent of the share issuance, soaring compared to 2.3 percent in the first quarter, ranking next to the real estate sector (total issuance value of nearly 9.65 trillion dong accounting for 32.04%). Typically, these were Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) with nine issuances, mobilising more than 5.9 trillion dong. This rank of BIDV was followed by Vietnam International Commercial Joint Stock Bank (VIB) with two issues, equal to 2 trillion dong, or HCM City Development Joint Stock Commercial Bank (HDBank) (1.7 trillion dong); Vietnam Prosperity Joint-Stock Commercial Bank (VPBank) (1.2 trillion dong); Saigon Hanoi Commercial Joint Stock Bank (SHB) and Vietnam Maritime Joint Stock Commercial Bank (MSB) (both raised 1 trillion dong).
Since the beginning of the year, the real estate was still the group with the highest total issuance of 29.213 trillion dong (equivalent to more than 44%). In the first 3 months, the banking group issued a relatively low volume, so the total issuance was only about 15.39 trillion dong (about 23, 47%).
While raising capital from corporate banking channels was still relatively difficult as the credit support package had not yet reached many businesses, the bond channel was forecast to continue to be active in the near future. Recently, the State Bank of Vietnam (SBV) had reduced the operating interest rate and lowered the deposit rate ceiling.
It seemed that the corporate bond channel would also become relatively more attractive when interest rates were higher. In addition, businesses also had the opportunity to lower interest rates on corporate bonds to reduce capital costs in the future.
Bond demand might decrease in Q2
Analysis Department of SSI Securities Corporation (SSI Research) assessed that, the corporate bond market was still growing well in terms of issuance volume in Q1/2020 but the issuance interest rate increased. Businesses were facing unprecedented risks due to the COVID-19 pandemic so investors also required higher interest rates for bonds. SSI Research believed that the demand for issuance in Q2/2020 might be reduced due to the disease affecting the financial plan but would increase sharply in Q3/2020 when the disease was under control (in the base case).
The group of commercial banks would not issue as much as 2019 and focused on the seven-to-ten-year term to increase tier 2 capital instead of the two-to-three-year term as before. Meanwhile, the issuance demand of other groups was still high, especially real estate.
Issuing interest rates would remain at current levels due to high but long-term risk premiums that were adjusted downward, in line with the downward trend of deposit rates. The interest rate difference between bonds and current deposits of up to four percent per year had attracted individual investors to participate more in the market.
However, in addition to interest rates, investors needed to pay special attention to the solvency, liquidity and stamina through the epidemic period of businesses. Mechanisms to protect individual investor interests and market information transparency had not improved much in the last quarter. SSI Research expected the government to promulgate the amendment of Decree 163 soon to create a platform to help the bond market develop more sustainably in the future.
