While it is urgent to tackle the liquidity problem, a fundamental solution is regaining investors’ confidence and stabilising the corporate bond market, experts said.

The bond market is expected to become a main source of funding for companies in the long term, easing the pressure on banks.

But an array of scandals involving issuances by property developers such as Tan Hoang Minh, Van Thinh Phat and VKC Holdings has eroded investors’ faith.

Meanwhile, authorities continue to investigate and punish property and bond frauds.

Nguyen Tu Anh, director of the general economic affairs department under the Party Central Committee’s Economic Commission, said the market has ample room for improvement.

It is a flexible capital channel that allows enterprises to raise funds without causing any dilution in ownership, he pointed out.

Between 2017 and 2021, the bond market grew at 46% annually, indicating the huge demand, he added.

Nguyen The Minh, director of analysis at Yuanta Securities, said there are three main channels for enterprises for mobilising capital: bonds, equity and loans.

“So far this year all these have been tied up.”

Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, said the bond market would continue to face hurdles because of the lack of investors’ confidence.

Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, said many real estate companies are also struggling with lack of liquidity and might have to make painful decisions to survive.

Many property developers are scaling down their business as can be seen by investment and construction delays, he said.

They have stopped embarking on new projects, issuing bonds and making IPOs, he added.

Huge pressure

A huge amount of maturing corporate bonds due for payment from now through 2024 is putting great pressure on issuers, who are mostly property businesses.

According to a report by credit rating agency FiinGroup, the 20 biggest bond issuers are facing liquidity problems since they cannot issue afresh but have to redeem maturing bonds.

The companies are all under great liquidity pressure over the next 12 months due to weak cash flows amid high interest rates, it said.

More than 35 trillion VND worth of bonds issued by property companies, mainly unlisted, will mature in 2022 and over 61 trillion VND in 2023.

Recommendations

Expert Le Duy Binh said it is vital to provide sufficient and transparent information to restore investors’ confidence.

Binh said it is necessary for the Government to intervene and resolve the difficulties faced by the corporate bond market, warning the banking system would otherwise be affected.

Bui Van Huy, director of DSC Securities Corporation’s HCM City branch, said investors should carefully evaluate the type of bonds they are holding before making a decision to redeem them prematurely.

The Government should allow commercial banks to participate in the purchase of bonds before maturity and treat them as a special form of credit, he said.

He also proposed offering preferential credit to key manufacturing industries and fields to help them tide over the current difficulties.

At an urgent meeting with securities companies and bond issuers, Minister of Finance Ho Duc Phoc ordered the bond issuers to consider selling assets to pay off their debts to investors.

“Bond issuers must maintain their credibility with investors whatever it takes.”

Deputy Minister of Finance Nguyen Duc Chi warned that bond issuers found committing wrongdoing would be severely penalised, stressing that the legitimate interests of investors would be protected under all circumstances.

Speaking at a recent meeting, PM Pham Minh Chinh stressed the Government’s determination to reform the bond, real estate and securities markets.

He also promised severe penalties for violations and assured that the rights and interests of people and businesses would be protected.

The Government has already set up three working teams for liquidity and currency, the property market and corporate bonds to carry out reforms./.