Set to mature: A hive of activity at the Thanh Xuan district of Hanoi. Issuers, particularly property developers, are struggling to meet their bond redemption obligations. This development is eroding investor confidence in the market, according to analysts. — Bloomberg
HO CHI MINH CITY: The corporate bond market will continue to face headwinds in the second half of the year, say experts.
Nguyen Ba Khuong, an analyst at stock brokerage VNDirect, has warned that a significant amount of corporate bonds are set to mature this year, leading to financial constraints for issuers and potential difficulties in meeting bond redemption obligations.
According to VNDirect, around 273 trillion dong (US$11.57bil or RM52.8bil) worth of corporate bonds will be maturing this year, with the majority coming due in the last two quarters.
Many issuers, particularly property developers, have already struggled to meet their bond redemption obligations, which has eroded investor confidence in the market.
While more than 42 trillion dong (RM8.1bil) worth of corporate bonds were rolled over in the second quarter, providing a short-term solution, this does not address the fundamental issues at hand, the experts noted.
A decree issued in March allows issuers to roll over bond maturities by up to two years if investors agree. However, if investors do not agree, businesses must fulfill their redemption obligations.
Issuers also have the option to negotiate with bondholders to repay with other assets.
To restore credibility in the market, experts emphasised the need for a comprehensive approach. Transparency and disclosure are key factors in rebuilding trust, they said.
Companies issuing bonds must provide clear and comprehensive information about their financial health, business operations and risk factors.
This allows investors to assess the creditworthiness of the issuers and make informed decisions.
In addition, regulatory procedures and enforcement need to be strengthened.
Regulatory bodies should establish stringent guidelines for issuers, underwriters and rating agencies, and ensure compliance with relevant regulations.
Any attempts to manipulate or misrepresent information should be met with severe penalties and legal consequences.
It’s also important to develop a well-functioning secondary market for corporate bonds, which would facilitate efficient bond-pricing mechanisms, providing investors with liquidity and enabling them to enter or exit positions as needed.
Experts have proposed settling the various scandals involving bond issuances by major property developers and protecting investors as soon as possible to free up the frozen market.
The Finance Ministry recently established a trading platform for privately placed corporate bonds.
Finance Minister Ho Duc Phoc said the launch of the trading platform would give fresh impetus to the market, improve liquidity and provide companies better access to capital.
He, however, pointed out that there is still a lot of work to do to build a fully-fledged market that is attractive to global investors.
Economist Dinh The Hien said the trading platform allows bond issuers to service their bonds that are coming due, and provides companies with better access to capital.
The corporate bond market experienced significant growth in 2020 and 2021, driven by increased capital demand from property developers and banks.
However, the collapse of the property market and the recent investigations into bond issuance and improper capital use by large firms have contributed to the problems now faced by the market.
The government has established three committees to carry out reforms in liquidity and currency, the property market and corporate bonds. — Viet Nam News/ANN
