The Ministry of Finance (MoF) will promote the cooperation programmes with the World Bank and the Asian Development Bank to streamline the legal framework for G-bond issuance to further encourage the participation of foreign investors in the market.
According to the Hanoi Stock Exchange (HNX), who is the organiser of G-bond auctions, foreign investors were net buyers in the country’s G-bond market consecutively in the first five months of this year though the proportion remained low.
Specifically, in the primary market, the investors bought more than VND1.5 trillion (US$65.79 million) of G-bond in the period and the amount for the secondary market was nearly VND3 trillion.
According to chairwoman of the Vietnam Bond Market Association Nguyen Thi Kim Oanh, net purchase of foreign investors in Vietnam’s G-bond has proved their confidence in the market has been gradually improved.
The participation of foreign investors has changed positively since 2015, Phan Thi Thu Hien, director of the Finance Department of Banks and Financial Institutions under the Ministry of Finance, said, adding that at the end of 2017, foreign investors held 5 percent of the country’s total G-bond compared with 4.5 percent at the end of 2015.
According to Hien, besides streamlining the legal framework for G-bond issuance, MoF will also work out measures to simplify the procedures for granting transaction codes to foreign investors and scrutinise transaction fees to further encourage foreign investors to invest in the market.
As the health of the economy is always a top priority for foreign investors when considering whether to invest in national bonds, Nguyen Thi Hoang Lan, HNX deputy general director, suggested that the country’s macro economic policies should be kept stable and consistent as foreign investors often see macro economic indicators to decide their investment.
According to HNX, G-bonds worth over VND56 trillion ($2.46 billion) have been successfully issued so far this year.
In May alone, VND11.17 trillion ($492.4 million) was raised during 20 auctions of G-bonds in May, up 45.8 percent from the previous month. Accordingly, five-year bonds offer an annual interest rate of 2.97-3 percent while bonds with 10-year, 15-year and 20-year maturity yield interest rates of 4.15-4.26 percent, 4.5-4.6 percent, and 5.14 percent, respectively.
Compared to the previous month, interest rates of five-year, 10-year, 15-year and 20-year bonds went up 0.03 percent, 0.16 percent, 0.13 percent and 0.02 percent, respectively.
In the G-bond secondary market, the total volume of G-bonds sold by the outright method exceeded 760 million, worth more than VND87.6 trillion ($3.85 billion), down 25 percent month-on-month.
Meanwhile, trading volume through repurchase agreements (repos) reached over 1.02 billion bonds valued at more than VND104.8 trillion ($4.61 billion), down 25 percent from April.
Foreign investors made outright purchases of more than VND4.7 trillion and outright sales of over VND3 trillion. They made repo sales of over VND235 billion but did not make repo purchases in May.
The government plans to issue G-bonds worth VND200 trillion this year, with the focus being on long-term maturities and keeping the coupons at low levels. Of which, G-bonds with term of below 5 years will total VND20 trillion each, 5-year bonds VND30 trillion, and 7-year bonds VND36 trillion. The value for 10-year, 15-year, 20-year and 30-year notes will be VND37 trillion, VND32 trillion, VND20 trillion and VND25 trillion, respectively.
The National Financial Supervisory Commission forecast that the G-bond market in 2018 would see modest change thanks to the economic growth of more than 6.7 percent and inflation staying below 4 percent.
