More policies for the corporate bond market

Minister of Finance Ho Duc Phoc said that the operation of this trading system demonstrates the strong determination of the Ministry of Finance in developing the financial market and the stock market. This operating system helps the State agency to better manage the market, and people will also participate in monitoring, thereby enhancing the transparency of the market.

The total trading volume of the whole market reached over 5 million bonds; of which, the immediate payment volume was nearly 4.1 million bonds and the end-of-day payment volume was 0.9 million bonds. The total trading value of the whole market reached 1,781 billion VND; of which, the immediate payment value was 1,690 billion VND, the end-of-day payment value was approximately 91 billion VND.

Minister of Finance Ho Duc Phoc assessed these as good signals, showing that if public, transparent and safe, individual corporate bonds can fully play their role in mobilizing capital for businesses.

According to the Ministry of Finance, with its potential and correlation with the regional market, the size of Vietnam's corporate bond market is still quite modest. Currently, the outstanding debt of the corporate bond market is over 15% of GDP. Meanwhile, the Financial Strategy sets a target of the corporate bond market size by 2025 at 20% of GDP and by 2030 at least 25% of GDP.

However, Minister Ho Duc Phoc also affirmed that the corporate bond market has developed quite positively in recent years, basically building a legal framework to encourage the development of the corporate bond market, supporting businesses to mobilize capital for production and business, helping many investors have more effective investment channels.

However, due to rapid growth, the growth rate in scale is not commensurate with the quality of the private corporate bond market. Specifically, the structure between publicly issued corporate bonds and private corporate bonds is not suitable; most businesses issuing private corporate bonds raise capital for high-risk industries...

In particular, there is a phenomenon of taking advantage of the flexible regulations on business establishment and operation to violate regulations on information disclosure, inflate charter capital, and mobilize and use capital for improper purposes.

This market has been revealing a number of risks that need to be recognized accurately, reasonably, and to the right extent in order to have appropriate solutions, helping the market develop in the right direction, safely, and sustainably.

Therefore, the legal framework and policy mechanisms for the operation of the corporate bond market are being gradually promulgated from Laws, Decrees to Circulars.

In particular, the Government issued Decree 08/2023/ND-CP dated March 5, 2023 amending and supplementing a number of provisions of the Decrees on individual corporate bonds. The Decree aims to create a legal corridor to remove some short-term difficulties for businesses, while still ensuring the rights and interests of investors.

Specifically, the Decree stipulates that enterprises can negotiate with bondholders to pay the principal and interest of bonds due with other assets when there is difficulty in fully and timely paying the principal and interest of bonds according to the issuance plan. Accordingly, the issuing enterprise and the investor can negotiate to balance the enterprise's resources and pay the debt obligations due.

Along with that, enterprises are allowed to negotiate with investors to change the terms and conditions of bonds according to regulations, and to negotiate to extend the term of bonds by no more than 02 years for bonds issued before September 16, 2022.

According to the Vietnam Bond Market Association, in the late 2022 and the first two months of 2023, almost no enterprises were able to issue bonds to the market, but from the time Decree 08 was issued to mid-July 2023, the total value of corporate bond issuance was VND 68,503 billion, with 11 public issuances worth VND 9,276 billion (accounting for 13.5% of the total issuance value) and 54 private issuances worth VND 59,227 billion (accounting for 86.5%).

Deputy Minister of Finance Nguyen Duc Chi commented that this is a positive sign showing that the policy impact has helped businesses and investors regain confidence and start returning to the market. On the other hand, after Decree 08 was issued, many businesses have successfully negotiated with investors to resolve problems related to liquidity and cash flow when bonds mature.

According to Deputy Minister Nguyen Duc Chi, after this decree, the awareness and consciousness of market participants have improved significantly, and they understand their responsibilities and obligations when participating in the market better. Issuers and service providers strictly comply with the regime of providing information to investors. The market is expected to make adjustments and develop sustainably.

According to Mr. Nguyen Hoang Duong, Deputy Director of the Banking and Finance Department (Ministry of Finance), in order to develop a safe and healthy corporate bond market and strengthen investor confidence, each participant in the market needs to comply with legal regulations.

Accordingly, enterprises with outstanding bond debt are responsible to the end for their bond debt obligations, proactively provide transparent information on their financial situation; their debt repayment ability through credit rating results, financial statement audits, fully disclose information on the payment of bond principal and interest; the use of capital from bond issuance, and are responsible for fully paying bond debt obligations according to the bond issuance plan that has been disclosed to investors to ensure reputation in the market.

On the investor side, according to Mr. Nguyen Hoang Duong, it is necessary to understand the provisions of the law; access information about the issuing enterprise and the bonds; carefully evaluate the financial situation of the issuing enterprise, clearly distinguish that corporate bond products are not bank deposits. At the same time, evaluate the level of risk commensurate with the profit when investing in bonds, make your own decisions and take responsibility for your own investment decisions.

Along with that, clarify the difference between corporate bonds and bank savings deposits; do not invite investors who do not meet the conditions to become professional securities investors to buy bonds.

Economist Dinh Trong Thinh said that in order for bonds to truly be an effective capital mobilization channel, there needs to be strong changes in policy mechanisms, corporate bond issuance mechanisms, and bond-issuing enterprises must be strictly managed by the state; there needs to be specific, clear, and complete regulations on issuance conditions and requirements on management and supervision; as well as regulations on auditing and accounting reporting.

According to VNA