The domestic corporate bond market developed rapidly in April, an official from the Ministry of Finance (MoF) said on May 11, marked by the strong involvement of private investors.

The involvement of small and private investors with no financial analysis capacity, however, plus the overall risks of businesses will, in turn, present potential risks for the market, Nguyen Hoang Duong, Deputy Director of MoF’s Department of Banking and Financial Institutions told local media. 

Duong said corporate bonds exceeded VND58 trillion (US$2.5 billion) in the first four months of this year, with the engagement of newcomers, especially production firms. 

The past issuance of corporate bonds has been in accordance with the orientations of the Government to diversify sources of social capital and gradually ease reliance on credit institutions, he added. 

Studies reveal that real estate enterprises hold the lion’s share of the market, making up about 49% of issued bonds with interest rates at over 11% compared with an average of 9.63%. 

Bonds issued by private investors increased from 8.8% in 2019 to 26.8% in the first four months, according to the official. 

Duong stressed that management agencies must pay more attention to building a legal framework to facilitate the capital mobilisation of businesses in the market, ensure market transparency, and protect investors’ rights, rather than tightening or loosening regulations on corporate bond issuance. 

He cited amended Decree No. 163/2018/ND-CP and a draft document on corporate bond issuance, which together with the Securities Law, set to come into force on January 1, 2021, and the amended Law on Enterprises, to also be put in place in January next year, will create a synchronous legal framework for the development of the market. 

The new documents set confidence indexes for issued bonds, making it easier for investors to make decisions, Duong said.