The last day before the Lunar New Year holiday, Techcom Securities Company (TCBS) updated the latest developments in the domestic bond market, showing a continuing trend.
According to this update, at the beginning of 2019, when banking activities and dong deposit rate movements in the market entered the peak season of the year, a part of personal cash flow still increased continuously in the channel corporate bonds.
An increasing trend
Corporate bonds are traditional and familiar products in Vietnam market. However, it became noticeable when there were new movements, which became more and more intense with the participation of individual investors, depositors of commercial banks.
Previously, in Vietnam, investors of corporate bonds (except for commercial bank bonds) consisted mainly of commercial banks and investment organisations, not many individual customers participated in shaping a real part in the market pie.
However, as more and more people join the flow, and they used to or are making money at commercial banks, the movements and related changes are no longer traditional.
According to some updated data in 2018, the volume of corporate bonds issued is still small. But the rising trend has been showing strong. In this trend, the participation of individual customers, through the connection of commercial banks and securities companies, is now considered to be the first step towards larger scale.
At TCBS, the point that holds 81.7 percent of the 2018 bond trading market share in HCM City Stock Exchange, the above increasing trend is evident.
Specifically, last year the company successfully issued more than 61,992 billion dong of bonds for large enterprises in Vietnam, up 79 percent compared to the total volume of 34,637 billion in 2017.
As updated by early 2019, TCBS had 18,587 customers. It is noteworthy that they come from 45 provinces across the country, the level of popularity following the network of a commercial bank.
Risk swap
Similar to insurance, the door has been opened with a wider tendency to distribute corporate bonds to individual customers at commercial banks.
In the past few years, people with large deposit balances, in some commercial banks, can receive an invitation to join the corporate bonds banks distribute, with higher interest rates.
As above, there have been more and more individual depositors participate. The door opened, the nature of the cash flow in banking operations has changed. The relationships accordingly change, and the risk also.
In Vietnam for many years, commercial banks acted as financial intermediaries, but mainly directly mobilised capital and lent money. The relationship between depositorsbanks borrowing businesses in this traditional mechanism places the banks at risk; and depositors also potentially take risks but not to a large extent.
As for the door that is opening up, the risks swap. The risks are transferred to depositors, who now hold bonds of the businesses instead of deposit money into banks like before. Bank separates itself from credit risk (with bad debts) since it does not provide direct loans as before, but merely serves as a service intermediary and collects fees.
With this door, traditional depositors become investors, have higher benefits since bond interest rates are often significantly higher than bank deposit rates, but they also have to accept higher risks.
Borrowing businesses have more direct channels to mobilise capital with interest rates that may be lower than bank loans. And this source is separated from annual credit growth.
That door and that swap are like the first shift between the credit channel and the capital market channel. It becomes noticeable when it tends to attract more individual customers, depositors.
With risk swap, banks in this movement are safer, have better service collection structure, reduce bad debt pressure and balance pressure in using capital when lending as usual.
This direction also stimulates the development of the capital market as the medium and long-term source of mobilisation channel for businesses, while banks focus its main function to meet the demand for short-term capital and working capital financing.
The remaining problem is the swap risk for those who used to be bank depositors. They become investors. The mechanism to protect these individual investors, the bonds come from which kind of businesses, and how is the transparent are the future of the level of swap.
In the future, along with the spread of distribution channels in many provinces and cities, the above door is having a more open direction, when recently there have been products of “retail” mobilisation with a unit of ten million dong instead of hundreds of millions of dong as beforea direction to further expand to attract individual customers who have been depositing money at commercial banks.
