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BANKING & FINANCE

Fostering faith
After posting a sizeable year-on-year decline in the first quarter of 2024 from shocks
that first occurred in late 2022, stakeholders in Vietnam’s corporate bond market
believe certain measures are needed to restore confidence among investors.

By HOANG LAN, ANH TUYET & HUYNH DUNG

ccording to the Vietnam Bond Mar- for at least one or two years following
ket Association (VBMA), the total shocks that took hold in late 2022 and
A value of bond issuances in the first early 2023.
quarter of 2024 was estimated at At a recent conference on Vietnam’s
VND15.71 trillion ($628 million), down debt capital market, a number of busi-
46 per cent year-on-year. This result, how- nesses and analysts identified solutions
ever, actually exceeded expectations, as to develop the market in a healthy and
the market had been forecast to be frozen sustainable manner.

three credit rating agencies. These com-
panies must meet certain regulations of
State management agencies in terms of
professional capacity, capital, and human
resources to ensure their own operational
efficiency and quality. Most have worked
with international credit rating agencies
to obtain professional support and ensure
Mr. Do Ngoc Quynh Mr. Paul Coughlin
General Secretary of the VBMA their credit rating activities meet inter- former Global Director of S&P Global Ratings
national standards.
Credit ratings - In addition to monitoring by State Risk transparency helps
A reference for bond pricing boost confidence
agencies and auditing companies, credit
rating agencies are considered an impor-
he efficient operation of enterprises tant piece of infrastructure in the market, hat happened in Vietnam’s cor-
is considered the most important helping boost transparency. Credit ratings porate bond market at the end
T factor in attracting investors to a are an effective tool to create a yield curve W of 2022 was not unique. Similar
capital market. Transparency is also key in the corporate bond market, which is incidents occurred in Thailand, Indonesia,
for market participants, as it creates a an important reference for all parties in and South Korea in the 1990s. The current
solid degree of trust. the market, not only investors but also context in Vietnam is different, but we
There are some businesses that publish issuers, State management agencies, and can still learn from the experience of others
false stories about their profits and oper- research organizations. in the region. We should not be overly
ational efficiency in order to catch the The VBMA has coordinated with its pessimistic about the market’s prospects.
eye of investors. When the truth comes members to create a system of “market Vietnam needs to continue consoli-
out, however, investors feel confused and makers” for bonds issued by credit insti- dating infrastructure in the corporate bond
are unsure who exactly they can trust. tutions. Market makers operate based on market, including completing market insti-
This also affects businesses performing a system of agreed common principles. tutions and architecture such as investors,
well and posting real profits, adding to This has initially helped create a relatively credit ratings, and yield curves.
their difficulties in mobilizing capital. transparent yield curve for bonds issued Many enterprises are still sensitive
I therefore believe there are two important by credit institutions. about analyses revealing risks in their busi-
tasks to unlock Vietnam’s capital market. Corporate bonds in the market have ness activities. However, investors need to
Firstly, improving the competitiveness yet to form a yield curve because they are clearly understand such risks to feel secure
of the economy and the operational effi- issued with different structures and risk when investing in corporate bonds.
ciency of enterprises. levels. Also, most issuers don’t have a The lack of information transparency
Secondly, creating a culture of trans- credit rating, so it is difficult to make an has become a challenge for both investors
parency, helping consolidate confidence accurate assessment. and management agencies. It is therefore
not only among investors but also among Investors tend not to choose bonds necessary to bridge the information imbal-
other market participants. without a yield curve. ance between participants in the capital
From my own observations, a culture There are many different ways to eval- market and provide in-depth analyses on
of transparency has been gradually taking uate bonds. However, the use of credit the credit quality of issuers and available
shape in the market. Together with the ratings provides a reference for evaluation debt tools in the market.
operation of a separate corporate bond and has proven popular in countries with Vietnam should allow insurance com-
trading floor via the Hanoi Stock Exchange a developed financial market. The method panies to more easily participate in its cor-
(HNX), the Ministry of Finance has has also been certified in the international porate bond market and also attract invest-
recently granted operational licenses to market. % ment funds to expand the investor base.%

42 Vietnam Economic Times May 15, 2024 en.vneconomy.vn