The policy of restraining the flow of credit into the real estate sector, especially real estate development enterprises, is requiring businesses to be more proactive in the financial market.
According to the State Securities Commission (SSC), the volume of corporate bonds successfully issued in 2018 reached 224 trillion dong, up 94.5 percent over the previous year. Debt in the corporate bond market in 2018 was 474.5 trillion dong, up 53 percent compared to the same period in 2017, and reached 8.6 percent of GDP in 2018.
Based on a sample survey of corporate bond issuance results of listed companies, analysts of Vietnam Dragon Securities Company (VDSC) said that banks, financial services and real estate accounted for a large proportion in the distribution structure. With the exception of the banking sector, the maturity date of corporate bonds in most major industries is under three years.
Regarding the banking sector, banks have boosted the issuance of corporate bonds in order to increase the size of tier 2 capital and supplement long-term capital, successful issuance interest rates hover around 7.5 percent per year. However, there are still differences between private and state-owned commercial banks. The latter tend to issue long-term, more than five-year corporate bonds, while the former is focusing on mobilising three-year term bonds.
In addition, securities companies and investors, representing financial services groups, actively issued corporate bonds in the past year with the mobilisation scale of 0.5 to 1.2 trillion dong and the main term from two to three years. Income of bonds issued by this group is about 8 percent10.5 percent per year.
The other big names in real estate industry are Vingroup (and member companies), Novaland and Dat Xanh,… The policy of limiting the credit flow into the real estate and special sectors especially real estate development enterprises, are demanding businesses themselves need to be more active in the financial market.
The purpose of using capital is mainly to develop real estate projects with a term of about two years. Regarding Vingroup’s interest fluctuations recorded in 2018 at 10 percent per year, lower than the average of 10.3 percent per year in 2017.
VDSC said that in recent years, the income of corporate bonds has decreased significantly and is stable at about 8 percent -10 percent per year for ordinary bonds. Therefore, the profit base of basic bonds created a significant difference with deposit and lending rates at the banking system.
According to SBV, the deposit interest rate for over 12 month terms is about 6.6 percent -7.3 percent per year and the interest rate for production and business loans is normally at 9 percent -11 percent per year.
In the market, in addition to the banking sector, it is possible to issue corporate bonds with yields around 7.5 percent per year, the increasing participation of major international institutions acting as underwriters. Typical cases must be mentioned such as MWG, CII, MSN, etc. with the yield of less than seven percent.
International Finance Company (IFC) has proposed a programme to support Vietnamese enterprises to issue domestic currency bonds to the international market, with the name Bong Sen bond. This will help diversify capital sources for businesses in the context of stable credit growth around 14 percent per year.
However, the lack of a credit rating organisation continues to be a bottleneck of Vietnamese businesses when approaching the world capital market. Therefore, in the case of implementation, VDSC believes that large enterprises listed on the stock market with open and transparent information will have a better chance of accessing this capital flow.
