KIS Vietnam Securities Joint Stock Company researches the price fluctuations in the market.

Scale, liquidity saw increases

After more than a year since a series of corporate bond violations involving companies such as Tan Hoang Minh, FLC, and Van Thinh Phat, which eroded investor confidence, the corporate bond market faced numerous challenges. However, as of now, the corporate bond market has witnessed several successful issuances.

According to the Ministry of Finance, 70 companies have issued corporate bonds with a total value of VND180.4 trillion in the first ten months of the year. Although the volume of corporate bonds issued has decreased by more than 45 percent compared to the same period last year, it has begun to show signs of an increase. Specifically, in October, the volume of corporate bonds issued reached VND41 trillion, a rise of VND17 trillion compared to September.

Mr. Nguyen Duc Chi, Deputy Minister of Finance, mentioned that the corporate bond market is showing signs of improvement, and the bond issuance volume is increasing due to the synchronized implementation of measures to stabilize the market following the Government's directives. Notably, since the effective date of the Government’s Decree 08/2023 in March 2023, the issuance volume of corporate bonds has reached VND179.5 trillion.

In the primary market, privately-placed corporate bonds are mainly acquired by organizational investors, making up over 95 percent, while individual investors constitute only 5 percent. In the secondary market, transactions of privately placed corporate bonds on centralized trading systems have exhibited growth after more than three months since the private placement corporate bond trading platform became operational.

Until now, the market has embraced and introduced into trading 451 bond codes from 114 companies, with a registered transaction value of approximately VND336.77 trillion. The average transaction scale for the entire market reached VND49.39 trillion over ten months, with an average transaction value of VND676.6 billion per session. In October 2023 alone, the total market transaction value reached nearly VND29.3 trillion, averaging around VND1.33 trillion per session.

Pre-maturity repurchases primarily from banks

Not only has there been an increase in successful corporate bond issuance, but in the first ten months of the year, the volume of corporate bonds bought back before maturity surpassed the amount issued. Specifically, businesses have repurchased corporate bonds before maturity, amounting to VND90.7 trillion, reflecting a 30.2 percent increase compared to the same period in 2022. Notably, the leading entity in pre-maturity corporate bond repurchases is banks, accounting for 61 percent of the total corporate bonds issued.

Explaining the recent repurchase of corporate bonds before maturity by commercial banks, an expert from VNDirect Securities Company suggests that, given the scenario of low credit growth, the banking system is currently dealing with excess liquidity. Consequently, banks are concentrating on buying back corporate bonds before maturity to address the concern of idle funds, optimize the utilization of capital, and, at the same time, enhance capital adequacy ratios.

The leader of a commercial bank, heavily involved in the pre-maturity repurchase of corporate bonds, has explained that due to a significant decline in deposit interest rates, currently around 5 percent per annum, the bank is actively buying back corporate bonds with higher interest rates issued in the past. The leader emphasized that this pre-maturity repurchasing strategy also allows the bank to have room for issuing new corporate bonds with over five-year terms to supplement capital for both medium and long-term lending. Because starting from October 2023, the State Bank of Vietnam has reduced the short-term capital utilization ratio for medium and long-term lending from 34 percent to 30 percent.

Data from the Vietnam Bond Market Association (VBMA) also reveals that in the first ten months of the year, the banking sector accounted for the highest proportion of issued corporate bonds, reaching VND99.02 trillion, constituting 47.3 percent of the total corporate bonds issued. Notable issuers in the banking sector include ACB with VND16.4 trillion, Techcombank with VND14 trillion, and OCB with VND11.2 trillion. The real estate sector follows with a total issuance value of VND73 trillion, making up 36 percent of the total.

Despite the recent positive trend of pre-maturity corporate bond repurchases, there is significant pressure regarding the refinancing of corporate bonds, amounting to approximately VND61.6 trillion from now until the end of the year. Additionally, a considerable number of enterprises are seeking debt restructuring.

According to statistics from VNDirect Securities Company, as of October 2023, more than 50 issuing organizations have reached agreements to extend bond terms with bondholders, with the total extended value exceeding VND95.2 trillion. Furthermore, MBS Securities Company has compiled data indicating that, in the first ten months of 2023, around 99 enterprises have reported delays or deferments in repaying the principal and interest of corporate bonds, with a total delayed payment value of approximately VND190 trillion. Among these, the real estate sector accounts for the largest proportion, about 70 percent of the delayed repayment value.

On this matter, the Ministry of Finance and the State Securities Commission have been directly engaging with enterprises carrying substantial corporate bond debts. They have urged these issuers to take full responsibility for meeting their corporate bond obligations. In case of difficulties, companies are expected to proactively collaborate with investors to devise appropriate solutions for bond repayment.