The Economic Commission warns the bond market has a high potential for risks

Capital mobilized through the issuance of individual bonds and then used for the wrong purpose, “circling” through businesses, risking loss of principal and interest of investors.

This warning was stated by the Economic Committee in the report on the situation of the corporate bond market sent to the National Assembly on May 31.

According to the report, last year, the total volume of corporate bonds issued was VND 637,000 billion, up 36.4% compared to 2020. In the first three months of this year, the amount of corporate bonds issued reached VND 144,100 billion.

Assessing that the corporate bond market is an important capital mobilization channel, but the Economic Committee believes that this market has high risks and imbalance in structure.

The rate of bonds issued by private placement is nearly 18 times higher than the amount issued to the public and accounts for nearly 95% of the total amount of corporate bonds. Especially, up to 70% of the issuance volume are credit institutions, real estate businesses, and securities companies. Real estate alone accounts for 30-50% of the total issuance volume, potentially exposing the market to risks associated with the real estate market.

In the report, the agency of the National Assembly also warned about the phenomenon of using capital mobilized through the issuance of private corporate bonds for wrong purposes and lack of transparency.

“The transfer of capital raised from bond issuance around other businesses carries the risk of using capital for improper purposes, which may lead to the loss of principal and bond interest of investors, especially in the case of the project faces difficulties”, the National Assembly’s agency commented.

Moreover, the quality of individual bonds is not high, the finance of some businesses is limited, causing risks of payment of principal and interest for bondholders and the banking system.

This agency cited data on the primary and secondary markets in 2021, the proportion of credit institutions, securities companies and individual investors holding bonds accounts for 34-46%. That is, the majority of bonds are bought by securities companies on the primary market and redistributed to credit institutions, individual investors and other institutions.

The bond market has a hot growth period and lacks stability. The volume of private bond issuance in the first quarter of this year increased sharply compared to 2020, real estate and construction were the two largest bond issuers, nearly 51% and 19%; followed by credit institutions, approximately 5%…

But in April, the structure of issuers changed significantly when real estate bonds dropped sharply, only 12%, while bonds of credit institutions increased to more than 63%.

This structure change, according to the Economic Commission, is due to the impact of the decision of the State Securities Commission to cancel nine bond issuances of Tan Hoang Minh Group.

The rapid development of the market over the past time is due to the high average interest rate of corporate bonds, which attracts investors. However, in the market, there are still investors who do not have experience, risk analysis ability, and buy bonds just because of high interest rates. They do not care about collateral, credit rating or guarantee conditions.

Individual investors can easily access corporate bonds with split lots and flexible investment terms. Meanwhile, bond issuance and distribution consulting organizations do not provide complete and accurate information to investors, causing them to confuse that these organizations pay debts on behalf of the issuing business. This puts investors at risk.

The issuance of “hot” growth bonds in the past two years, plus the average issuance term of nearly 3.8 years, should make the outstanding balance to be paid in the next 2 years very large, creating pressure on debt repayment for developing businesses. onion.

For example, the value of bonds maturing in 2022 is about VND 144,500 billion, of which maturing real estate bonds account for more than 43% (about 62,470 billion). Maturity bonds of credit institutions are about VND 29,160 billion, accounting for 20%.

The next two years will be the time when the amount of bonds due to maturity will increase, respectively VND 271,400 billion to be paid in 2023 and VND 329,500 billion in 2024. Nearly 77% of these are real estate bonds. Given these numbers, the Economic Committee emphasized the need for more clarification on the debt repayment capacity of enterprises.

In order for the bond market to develop in a balanced manner, becoming an important medium- and long-term capital channel for the economy, the Economic Committee suggested the Ministry of Finance continue to study and perfect the legal framework on securities and the stock market. securities market, especially the regulations on the conditions for the issuance of private corporate bonds, professional securities investors and increased sanctions for violations.

On the side of businesses, the National Assembly’s agency emphasized improving financial capacity, governance and applying international standards, transparency in information disclosure…

Mr. Minh


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