Besides, in the money market, tightened credit growth, rising interest rates and weak banking system liquidity at a certain time also disrupted the issuance of corporate bonds.

The corporate bond market had another quiet month of August when there were only 26 privately placed corporate bond issues worth VND13,930 billion and a publicly offered bond issue of VND300 billion.

Hard to raise funds from the corporate bond channel

According to a report by the Vietnam Bond Market Association (VBMA), the corporate bond market had another quiet month of August when there were only 26 privately placed corporate bond issues worth VND13,930 billion and a publicly offered bond issue of VND300 billion. However, most bonds were issued by commercial banks and only two non-bank issues were offered by Fuji Nutri Food Joint Stock Company and Khang Dien Housing Trading and Investment Joint Stock Company with a total value of VND1,800 billion. Thus, in the past four months, new corporate bond offerings were not as "hot" as before.

Meanwhile, the Government repeatedly has directions and projects for strong capital market development, with a focus on the corporate bond market aimed to reach 20% ​​of GDP by 2025. This goal is not simple at all.

Dr. Vu Tien Loc, Chairman of the Vietnam International Arbitration Center and member of the Economic Commission of the National Assembly, said that the Government has introduced many economic and business support policies, including fiscal policies. In addition to relaxing taxes, the Government is also boosting public investment which is also confronting many difficult problems.

Recently, the State Bank of Vietnam (SBV) eased credit room for banks but Vietnam is facing inflationary pressures. Thus, the room is unlikely to be loosened much. Therefore, the credit supply to the economy is also limit ed while there is a huge capital demand for economic recovery and development. For that reason, the market is hoping for other credit valves for the economy through stock and bond markets.

“In other countries, the fund mainly comes from the capital market while in Vietnam it is mainly from credit. The country’s capital market has developed relatively strongly in the last five years but remained fledging. The fund, sourced through securities and bonds markets, only accounts for 26%. This drawback needs to be solved by Vietnam. It is necessary to bring people's money to business, not to savings accounts at banks,” he added

Many companies are also diversifying capital sources, including through securities and bonds. In fact, there are successful examples but it is still difficult to raise funds on these channels.

It is very important to develop the capital market to create more fundraising channels for businesses, Dr. Loc noted. Then, companies will have more options to seek funds for their business operations, particularly capital-short property developers which may face collapse on lack of funds. Authorities have acted to make the market better but they will also need solutions to unlock the capital market.

Dr. Le Xuan Nghia, Member of the National Financial and Monetary Policy Advisory Council, said, the total outstanding corporate bonds are valued at VND1,400 trillion (US$60 billion) and the total medium and long-term capital in the banking system is VND5,000 trillion (US$213 billion). In recent years, the bond market grew by 30-35% a year. Reportedly, the bond volume doubled every two years, from VND2,800 trillion to VND5,600 trillion two years later and to VND11,200 trillion after six years. This source of capital can shoulder most of the medium and long-term capital that the banking system is seeking.

However, no one cares about that importance but sees it as a "gambling" game of bond issuers, he said. It is very reprehensible to have no specialized supervisory agency caring about developing a medium and long-term capital supply market and mainstreaming the private economy.

A transparent and objective credit rating system needed

Dr. Vu Dinh Anh, an economic specialist, said that the corporate bond market consists of privately placed bonds and publicly offered bonds. Among VND1,400 trillion of issued bonds, 80% are privately issued and the rest is publicly sold. Decree 153 focuses on privately placed bonds but no agency has so far answered whether 20% of publicly sold bonds have any problems or not.

Notably, the COVID-19 pandemic strongly affected bond issuers in 2021, which cannot be ignored.

“It is important who is responsible for the corporate bond market. Decree 153 clearly states the Ministry of Finance, but it is impossible for only the Ministry of Finance to solve existing market problems without the State Bank of Vietnam because it is the biggest buyer of corporate bonds,” he stressed.

It is thought that Vietnam’s corporate bond market currently has no credit rating, no collateral and no underwriting, Mr. Anh noted. However, no collateral is an important feature of the corporate bond market because companies would rather borrow money from banks if they had collateral assets. The most important thing for corporate bonds is that they must be based on credit ratings. Even if they are rated low, companies are still entitled to issue bonds. Therefore, it is important for Vietnam to develop an honest and objective credit rating system.

Mr. Don Lambert, head of the Private Sector Development Unit, Asian Development Bank (ADB) in Vietnam, said, Vietnam has a very fast-growing bond market but the development of credit rating agencies mismatches it.

Presently, there are many credit rating agencies in the world and there are also reputable ones in Asia. If Vietnam wants to have successful credit rating agencies, it needs to learn from the experience from global credit rating agencies, he added. They can help provide best practices and standards, especially in terms of experience and governance.

In Vietnam, only a few investors invest in corporate bonds but mainly in government bonds and bonds issued by banks. Meanwhile, the investment demand is still very large, clearly evidenced by insurance market development. Therefore, Mr. Don Lambert suggested that Vietnam urgently need credit rating agencies with mandatory requirements. Besides, businesses are obliged to follow these requirements as market examples because many are quite weak in information disclosure. Subsequently. Credit rating agencies play a great role in information transparency.

“Vietnam can completely give a credit rating because it already has some domestic credit rating agencies. Besides, once a good legal environment has been developed, it will attract investors,” Mr. Don Lambert asserted.