With authorities recently warning individual investors about the risks of buying corporate bonds, the State Securities Commission of Vietnam could tighten regulations on their issuance this year in line with a government decree set to take effect next year, analysts of brokerage Mirae Asset Vietnam said in a report.

The decree, effective January 1, 2021, would limit bond issuance through private placement to three times the issuing entity’s equity.

It will also require a minimum six month gap between two issuances, a proposed rule that seeks to prevent businesses from raising money from a large number of investors via private placements.

The Finance Ministry had in February proposed more stringent regulations for corporate bond issuance to protect investors after some companies made issuances worth 50 to 100 times their equity.

Private investors are pouring more money into corporate bonds. They bought 9.1 percent of corporate bonds on the primary market as of November last year, up from 6.9 percent in 2018-end, according to the ministry.

In the first four months, over VND60 trillion ($2.6 billion) worth of corporate bonds have been issued, up 1 percent year-on-year, according to Mirae Asset Vietnam.

Most of the bonds are issued by unlisted companies. The average coupon rate was around 10 percent, same as last year, with some exceptions of 13 percent.

Real estate firms led the pack with 37.2 percent of issuance value, followed by banks (22.8 percent) and tourism/hospitality firms (16.6 percent).  

As businesses need money to recover from the impacts of the Covid-19 pandemic, bond issuance is set to continue rising amid slower credit growth, the Mirae analysts said.

The value of corporate bond issuances increased by 25 percent from 2018 to VND280 trillion ($12 billion) last year, according to SSI Securities Corporation.