Vietnam: Maintain Stability in the Corporate Bond Market

Vietnam: Maintain Stability in the Corporate Bond Market

According to the Ministry of Finance’s report on the corporate bond market (CBM) situation, solutions for sustaining market stability and addressing violations show that, for the individual CBM market in the first 10 months of the year, 70 enterprises issued bonds with a total value of 180.4 trillion dong (a 45.1% decrease compared to the same period in 2022); the volume of pre-mature buybacks amounted to 190.7 trillion dong (a 30.2% increase compared to the same period in 2022).

Since the effective date of Government Decree 08/2023/NÐ-CP (March 5, 2023), the total issuance volume has reached 179.5 trillion dong. For October alone, the issuance volume was 41 trillion dong, a 17 trillion dong increase compared to September (23.4 trillion dong).

It is noteworthy that, to date, enterprises have repurchased bonds before maturity totaling 190.7 trillion dong (higher than the total issuance). In October 2023 alone, enterprises repurchased approximately 14.2 trillion dong. Primary investors in the CBM are institutional investors (constituting 95% of the total issuance volume), with individual investors accounting for only 5%. In the secondary market, individual investors hold about 28.5% of the total outstanding individual CBM debt (equivalent to approximately 285.6 trillion dong).

To meet the criteria for upgrading the stock market from the frontier market to the emerging market, the Ministry of Finance has consulted with two rating organizations, MSCI and FTSE, along with advice from the World Bank. Among the 12 improvement areas for the Vietnamese stock market, there are policy and practical issues that need focused resolution, such as pre-trading margin requirements, foreign ownership limits, etc.

The Ministry of Finance will lead and coordinate with the State Bank and relevant ministries, sectors, and units to comprehensively review and propose amendments and supplements to related regulations, aiming to promptly implement the central counterparty (CCP) payment system.

Regarding foreign ownership limits, the Ministry of Finance has proposed that the Ministry of Planning and Investment disclose the full maximum foreign ownership ratio for conditional business sectors, limiting access; and regularly update the electronic information page of the Ministry in both Vietnamese and English to facilitate foreign investors’ easy access and understanding; research to reduce the number of unnecessary sectors restricting access to the market for foreign investors according to the list of sectors not currently accessible to the market and those with conditions.

The Ministry of Finance will also review and amend regulations on the disclosure of information by public companies in the direction of requiring large-scale listed companies (expected to be companies listed in the VN100 index) to publish information in both Vietnamese and English while implementing the announcement of the maximum foreign ownership ratio at all public companies to provide foreign investors with convenient access to information about the possibility of participation in businesses.

In the solutions to continue stabilizing the corporate bond market, managers continue to convey many important messages. In addition to implementing synchronized macroeconomic policy measures, controlling inflation, and promoting the disbursement of public investment capital, the Ministry of Finance emphasizes the need to quickly resolve difficulties and stabilize the real estate market; monitor CBM payments due, and strengthen information dissemination and monitoring efforts; organize the market and enhance the effectiveness of supervision management.

In addition, a comprehensive review is needed to improve legal regulations in the Securities Law, Enterprise Law, and related laws; research credit rating incentive policies, promote the credit rating upgrade process, develop the organized institutional investor system; and strengthen resources and personnel for specialized inspection agencies.

In particular, the Ministry of Finance emphasizes that issuing enterprises must take responsibility for their debts, and investors must also protect their assets. Regulatory authorities need to intensify propaganda efforts and enhance supervision. With these actions, it is hoped that the corporate bond market will continue to be adjusted and operate stably and efficiently, enhancing the vitality of businesses in Vietnam.

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