According to the centre for Analysis and Investment Advisory of Saigon Securities Incorporation (SSI Research), in the second quarter (Q2) of 2020, individual investors purchased 13.3 trillion dong of corporate bonds on the primary market, up by 38 percent compared to Q1 2020. In the first six months (H1) of the year, individual investors purchased 23 trillion dong of corporate bonds, accounting for about 13.4 percent of the total issuance volume of the market, equivalent to 79 percent of the purchase by individual investors in 2019.
By sector, corporate bonds of real estate businesses were net bought the most, reaching more than 14.540 trillion dong, accounting for about 63 percent of the total net buying value. In H1 2020, real estate businesses also recorded the largest value of bond issuance with a total of 71.6 trillion dong, accounting for 41.8 percent of the total issuance value, 57.5 percent higher than the same period of 2019. Real estate bonds issued in Q2 2020 have an average term of 3.26 years and average issuance interest rate of 10.42 percent per annum, respectively less than the 3.85 years and 10.77 percent per annum in Q1 2020.
In addition to individual investors, the bond purchase of commercial banks was also exciting. In H1 2020, banks purchased a total of 38.4 trillion dong of corporate bonds issued by non-credit organisations in the primary market, equivalent to 31 percent of the total issuance value (except banks) of the entire market. Commercial banks focused on the corporate bonds of real estate and energy businesses. The bonds of energy and mineral businesses offer the second highest interest rate in the market, reaching 10.5 percent per annum, equivalent to an average long-term of 6.7 years.
According to SSI Research, the volume of corporate bonds that commercial banks have purchased may be significantly larger because many issued lots were only noted as being purchased by domestic organisations.
According to the financial statements of commercial banks. By the end of Q1 2020, the value of bonds issued by economic organisations held by 18 commercial banks was 165.2 trillion dong, 37.2 trillion dong higher than late 2019, in which Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and Vietnam Prosperity Commercial Joint Stock Bank (VPBank) owned the largest number corporate of bonds.
The bond market may rise hot in Q3.
“The development of the bond market in general and corporate bond market in particular is indispensable to create a balance and improve the quality of Vietnam’s financial market,” said SSI Research. However, the recent overheated growth poses many potential risks to the sustainability of the market. From the beginning of the year until now, the Ministry of Finance (MOF) has continuously issued warnings to the market, consulted market members and officially issued the amended Decree 81/2020/ND-CP.
To prepare for the release of Decree 81, the MOF has many times gathered comments of market participations for the draft decree from the beginning of the year. The sharp increase in issuance in Q2 is partly an acceleration before the issuance conditions are tightened.
According to SSI Research, the corporate bond market may heat up in Q3 2020, but cool down in the last quarter of the year. SSI Research mentioned that in July and August 2020, businesses may strongly increase their bond issuance before Decree 81 officially takes effect. After September 1st 2020, the number of private placements will plummet, and businesses wishing to issue will mostly have to switch to public offering. Along with the extension of the roadmap to lower the ratio of short-term funds used for medium and long-term loans, the credit channel of commercial banks will become the main financing channel of businesses, especially real estate units.
