As corporations issue more bonds, credit rating firms are needed
VND9.103 trillion worth of listed corporate bonds were issued in the first quarter of 2019. Vietnamese enterprises are issuing bonds instead of borrowing money from banks when seeking long-term capital.
In September 2018, PAN Group issued VND1.135 trillion worth of bonds which had the face value of VND1 billion. These were 5-year bonds with the fixed interest rate of 6.8 percent per annum, much lower than the lending interest rate in the market.
In late January, REE issued VND2.318 trillion, or $100 million worth of bonds with fixed interest rate of 7 percent per annum for 10 years. The capital will be used to strengthen investment in housing and office real estate.
Real estate firms are the biggest issuers recently. Phat Dat JSC management board approved the plan to issue VND150 billion worth of unconvertible shares to seek capital for a new project.
|VND9.103 trillion worth of listed corporate bonds were issued in the first quarter of 2019. Vietnamese enterprises are issuing bonds instead of borrowing money from banks when seeking long-term capital.|
Khang Dien Investment & Housing has also issued VND450 billion worth 2-year bonds at the interest rate of 12 percent per annum.
Truong Hien Phuong from KIS Securities noted that enterprises now prefer issuing bonds to borrowing from banks. The requirements thatventerprises have to satisfy to issue bonds are easier than the requirements set by banks on borrowers.
Meanwhile, by issuing bonds, enterprises can mobilize long-term capital. This allows them to take initiative in drawing up their business plans.
According to Vu Dinh Anh, a respected economist, this is good news for the Vietnamese capital market. Through bond issuance, businesses can diversify financial resources and not rely on bank loans.
Under the plan on developing the corporate bond market by 2020, the market would be equal to 7 percent of GDP by 2020 and 20 percent by 2030. However, the value of the market by 2018 far exceeded the target set for 2020.
Nhip Cau Dau Tu predicted that the corporate bond market would grow by 30-40 percent per annum.
According to Bui Quang Tin, a renowned finance expert, the bond market has been growing rapidly as the demand from enterprises is increasingly high. However, the market lacks intermediary institutions which connect sellers and buyers, such as credit rating firms.
In principle, when issuing bonds, businesses have to provide financial reports and information about their operation. However, the documents are written in a way which make it difficult for investors to understand.
Therefore, Vietnam needs institutions which can assess the value and potential of businesses, so they can be ranked in terms of credit, safety and debt payment capability. The ranking will help investors more easily select securities and make decisions on which enterprises to invest in.
Bond issuance is becoming an ideal channel for real estate firms to raise capital as credit policies for property development are gradually being tightened, experts said.
Though the corporate bond market really needs to be developed in order to reduce the dependence of the economy on commercial banks, corporate bond issuance must be transparent and secure.