Despite the recent rapid development, Vietnam’s corporate bond market had a long way to go, to share the burden of providing capital to the economy with the banking system as expected by the government.
Statistics from Hanoi Stock Exchange (HNX) and businesses showed that 211 businesses were offering a total of 300.588 trillion dong in 2019. Of which, the total number of bonds issued was 280.141 trillion dong, equivalent to 93.2 percent of the price. Offering value increased by 25 percent compared to 2018. The statistics also showed that most of the above corporate bonds were issued in separate forms, only about 6 percent of which were issued to the public by commercial banks. The large number of issued bonds also increased the corporate bond market size from nine percent of the gross domestic products (GDP) in 2018 to about 11.3 percent of GDP in 2019, bringing the total outstanding bonds to nearly 670 trillion dong at the end of 2019.
It was worth noting that the dominant market was still domestic institutional investors with the total buying volume of 219.2 trillion dong, equivalent to nearly 80 percent of the issue in 2019. By 2020, the total amount of corporate bonds issued in the first six months were estimated at 159 trillion dong, up 50 percent over the same period in 2019.
Although the market size had grown continuously over the years, the corporate bond channel was still quite small compared to other capital mobilisation channels, especially the bank credit channel. With the bank credit scale at the end of 2019 was about 8.2 quadrillion dong, equivalent to 138.4 percent of GDP, the size of the corporate bond market was only about 8 percent of the bank credit channel.
Statistics by the Asian Development Bank (ADB) showed that the total size of Vietnam’s bond market, including government bonds and corporate bonds, at the end of Q3/2019 reached about $95.37 billion, equivalent to 37.6 percent of GDP, which was equal to the Philippines’ but still far from the ratio of approximately 60 percent of GDP of China and Thailand. This ratio was even lower than some developed economies in Asia, such as Japan with 214 percent of GDP, and South Korea with 120 percent of GDP.
The above statistics proved that Vietnam’s corporate bond market had a long way to develop, to be able to share the burden of providing capital to the economy with the commercial banking system as government expectations.
First of all, it must be affirmed that the shift of capital mobilisation from bank credit channel to corporate bond issuance channel, towards a more balanced development between the capital market channel and bank credit channel, was suitable with the State’s orientation and in line with the ‘Roadmap for developing Vietnam’s bond market from 2017 to 2020, vision to 2030′ and the project ‘Restructuring the securities market and the insurance market until 2020, and orientation to 2025′ that had been approved by the prime minister. However, the rapid, somewhat hot development of the corporate bond market in recent years had also caused certain concerns among economists and market regulators.
In that context, like the sayings of Nguyen Khac Quoc Bao, Hochiminh City University of Economics, warning to interrupt investment in hot-growing corporate bonds was good. However, if exaggerated, it would negatively affect this market, especially when the market had just started to be active, had received the attention of the public in recent years. It should be noted that, before that, despite the market development efforts of the government and the relevant regulatory agencies, the market was still unable to develop. Due to that, businesses and the economy depended entirely on the credit capital of commercial banks.
Therefore, it was necessary to strictly request and supervise the compliance of the law during and after the issuance of issuing organisations, improving the ‘gatekeeping’ ability of issuing consultancy organisations. In order to ensure the quality of bond issuance, soon there were organisations with corporate credit rating capacity. Besides, improving the investor’s knowledge of this financial product was of great importance and basis for the corporate bond market to develop safely and sustainably in the future.
