Interest from savings is increasing, reaching the highest level of 8-8.5 percent per year in many banks such as Viet Capital Joint Stock Commercial Bank (Ban Viet), Vietnam International Joint Stock Commercial Bank (VIB) and Vietnam Prosperity Joint Stock Commercial Bank (VPBank). For those who prefer safety and stability, this is the popular investment channel. However, in 2019, experts predict that there is another investment channel, which can compete with the savings. That is to invest in bond investment funds.
Currently, many banks, fund management companies, insurance companies and securities companies have set up bond investment funds such as Techcom Bond Fund (TCBF) of Techcombank, Vietnam Bond Fund (VFMVFB) of VietFund, Baoviet Bond Fund (BVBF) of Bao Viet, SSI Bond Fund (SSIBF) of SSI, MB Capital Vietnam Bond Fund (MBBF) of MB, Vietinbank Bond Fund (VTBF) of VietinBank. The portfolio of bond funds is mainly comprised of corporate bonds. For example, 91 percent of assets in TCBF are corporate bonds and in SSIBF, it accounts for at least above 80 percent.
The reason for investment funds’ interest in corporate bonds is that this bond is a form of capital mobilisation which is booming in Vietnam. The policies are being adjusted towards promoting this channel to develop.
For example, Decree 163, effective from January 1, 2019, has opened up a favourable legal framework (as if it is not compulsory for issuing enterprises to be profitable in the preceding year, can issue many times), This decree is also clear (mandatory bond deposit within 10 days) and transparent (publish information in form, publish information periodically, publish extraordinary information in 24 hours). Requirement for capital increase under Basel II rules pushes banks to find more long-term sources from bond issuance.
Therefore, banks such as Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank), Vietnam International Joint Stock Commercial Bank (VIB), Military Joint Stock Commercial Bank (MB) and businesses such as Novaland, Vingroup and Masan Group… are pushing to mobilise capital through bond issuance. Fixed dividends are higher than savings interest rates (averaging 8-10 percent per year) and shorter issuance periods (down to two and five years). Recently, Camimex also plans to issue one-year bonds with an interest rate of 12 percent per year. Furthermore, businesses also offer issuance methods to facilitate investors. For example, buyers of Vingroup bonds can sell at any time. Or customers will receive real interest rates, not as the form of savings, in which they only receive interest rates for non-term deposits in case of withdrawal before maturity.
In particular, as noted by Rong Viet Securities Company (VDSC), the bond investment channel is no longer a game of professional organisations but individual investors can participate through bond funds. For example, with just one million dong, people can participate in buying TCBF bonds. TCBF also launched various products such as Profitability bond, FlexiCash (Flexible bond investment fund…).
Thanks to these advantages, bond investment funds had a winning year of 2018. According to Viet Dragon Securities Company (VDSC) research data, TCBF’s yield is about 8.5 percent per year, VFMVFB is 10.6 percent, BVBF 9.9 percent, SSIBF 8.1 percent. The yields of bond funds far exceeded stock investment funds and were significantly higher than bank savings.
Bond investment funds have become increasingly attractive. The evidence is that TCBF has attracted more than 15,000 customers and its net asset value (NAV) has increased by 185 percent, reaching more than 5,700 billion dong at the end of 2018, becoming the largest domestic investment fund in Vietnam. There are months, according to the sharing of Nguyen Xuan Minh, Chair of Techcombank Securities (TCBS), this fund attracted 700 billion dong, with the number of new registered customers continuously increasing. TCBF expects the Fund to attract more investors to raise its total assets to $1 billion.
2019 is expected to be an exciting year of the corporate bond market when Vietnam Electricity Corporation, Masan Group, Vingroup and Sun Group all plan to continue to issue medium-term bonds up to tens of trillions of dong. Moreover, Nguyen Xuan Minh assessed that the market potential was still very large because compared to the region; the scale of Vietnam corporate bond market was still modest. According to the Asian Development Bank (ADB), Vietnamese corporate bonds only reached nearly 1.45 percent of GDP, while this figure in Thailand, Indonesia, Malaysia and Singapore reached 20.80 percent, 2.87 percent, 33.77 percent, and 46.34 percent of GDP per country respectively.
VCBF, TCBF funds, etc…are all planning to develop more products and types of bond investment funds this year. For investors, to participate in this channel, it is necessary to pay attention to the team elements of fund management companies and their operational strategy. Because with the same bond fund, VFF of VinaWealth only achieved the annual yield over six per cent.
Bond fund is not risk-free investment channel. Because if the fund invests in the bonds of inefficient businesses, losses or even the risk of bankruptcy, the investment will be at risk. This is why when investing in bonds, experts often recommend investors to pay attention to the credit rating of issuers. But the problem is that Vietnam does not have an international standard credit rating system.
