The first quarter is usually the low season of bond issuance in the year due to Tet holiday and is the stage of business plan preparation. Nevertheless, this year, businesses were still affected by the disease but the number of bonds issued still grew by nearly 40 percent compared to the same period of 2019.
According to SSI Research, 47.5 trillion of corporate bonds were issued in the first three months of the year. In particular, the group of real estate businesses led in the number of bonds issued with a total of 23.202 trillion dong, accounting for 49 percent of the total market issue and up 9.8 percent over the same period. Banking group only issued 940 billion dong (2.3%).
In the first quarter, the average interest rate of the whole market reached 10.4%, higher than the average of the fourth quarter and the whole year of 2019. The main reason is that the banking group, accounting for a large proportion of the issue in the previous year with the lowest interest rate, issued very little in the first quarter of this year. Average interest rate for this group also increased sharply to 9.26%, two percent higher than last year due to the longer average issuance term.
The average interest rate of real estate and other financial institutions was 10.77 percent and 8.9%, respectively, higher than the average of 2019 despite a shorter term of one to two months.
In addition to financial institutions, domestic individual investors are still actively participating in the issuance, totalling 9.546 trillion dong. The proportion of bonds invested by individuals over the total issuance of the whole market in the first quarter was 20%, doubling the average of 10 percent in 2019. In which, this group mainly bought real estate bonds, accounting for 6.3 trillion dong, equivalent to 28.3 percent of the issue.
All 5.347 trillion dong of bonds issued in 110 batches of TNR Holdings in the first quarter of this year were purchased by domestic individuals. In 2019, individual investors also purchased the full 5.345 trillion dong issued by this business.
A number of other bonds have been bought by individual investors such as Phu Hung Real Estate Investment Joint Stock Company (400 billion dong), Thien Duong Bay Resort Co., Ltd (166 billion dong), and Hai Phat Investment Joint Stock Company (147 billion dong). The interest rates of these real estate businesses are mostly fixed from 11-13%.
According to the analysis of the analyst group, the corporate bond market is still growing well in terms of issuance volume but interest rates have increased. The reason may be that businesses are facing unprecedented risk of Covid-19, so investors require higher interest rates. Issuing demand is forecasted to decrease in the second quarter but increase in the last months of the year.
“We think the demand in the second quarter may reduce due to the significant impact of the disease on the financial plan but will increase sharply in the third quarter when Covid-19 is under control,” the report of SSI Research wrote.
The banking group is forecasted not to issue as much as 2019 and focus on seven to ten year tenors, while the demand of other groups is still high, especially real estate.
