Nearly half of corporate bonds do not have collateral

VCN - The Ministry of Finance stated that through management and supervision, it was able to show that the corporate bond market still has some potential risks, and needs to be closely monitored for healthy growth. Giving recommendations to investors, the Ministry of Finance said that it needed to pay attention to basic investment principles and that high interest rates would be accompanied by high risks. Therefore, it is necessary for individuals to carefully evaluate the risks before deciding to buy bonds.
Corporate bonds have many potential risks. Source: Internet
Corporate bonds have many potential risks. Source: Internet

Some hidden risks

For collaterals of bonds, among the private placement of corporate bonds issued in the first months of 2021, bonds with collateral accounted for 50.9%. Bonds without collateral accounted for 49.1%, of which bonds issued by credit institutions and securities companies accounted for 76%.

Among 300 companies that issued private placement bonds in the first months of 2021, 207 companies issued bonds with collateral. Collaterals of bonds mainly include real estate, securities, programs and projects.

Although the percentage of bonds with collateral is high, the quality of the collateral is mainly in projects and assets formed in the future, or shares of enterprises. The value of these assets is often not accurately valued or fluctuates sharply following to market movements. Accordingly, in case the real estate market or the stock market fluctuates, the value of the collateral may not be enough to pay the principal interest of the bond.

"Besides that, the collaterals of bonds could be used to guarantee loans and other bond issuances of enterprises, so investors needed to carefully evaluate these risks," the Ministry of Finance said.

For issuers in the market, there were still cases where enterprises issued corporate bonds with both a large volume and small equity, resulting in loss of results over the years.

Especially for the real estate group, among more than 100 real estate enterprises that issued private placement bonds in 2021, 26 enterprises recorded losses in the first six months of 2021. As of June 30, 2021, the average debt-to-equity ratio of listed real estate companies was 2:5, while the ratio of unlisted real estate companies was 8:1.

Carefully assess the risk before "putting money down"

For investors, statistics showed that professional individual investors tended to reduce purchases on the primary market of private placement corporate bonds, however, in the secondary market, the holding rate of private investment investors was still very high.

According to the Ministry of Finance, the Law on Securities, the Law on Enterprises and the decrees on corporate bond issuance clearly stipulated that only professional securities investors could buy and trade private placement corporate bonds.

Therefore, before considering buying private placement corporate bonds, investors need to study the regulations and penalties for violations of professional securities investors.

When being introduced to private placement corporate bonds, investors need to ask the issuing company or the distributing organization to provide complete and accurate information on the financial situation of the issuing company, the purpose of issuing bonds, collaterals and characteristics and rights and obligations of bondholders.

In addition, after buying bonds investors need to regularly update their financial situation, their debt repayment capacity and whether the use of capital raised from bonds is suitable for the purpose.

“Only when information about bonds is known, fully assessed and carefully considered can investors make a decision to buy bonds or not. Individual investors should not buy private placement corporate bonds if they do not have the ability and resources to fully assess the risks of the bonds, closely follow the disbursement progress, the purpose of capital use, and the financial situation of issuance enterprises after buying bonds”, the Ministry of Finance recommended.

The Ministry of Finance also recommends that investors pay close attention to the basic investment principle that high interest rates would be accompanied by high risks. Therefore, they must carefully evaluate the risks before deciding to buy bonds and should not buy bonds through the offers of service providers without carefully understanding the financial situation of the issuer and the terms and conditions of the bonds.

Investors should also note that credit institutions and securities companies that distribute corporate bonds would not guarantee the safety of bond purchases. These organizations are only service providers, enjoying service fees from the issuer without being responsible for the appraisal/assessment of the issuer's financial position and debt repayment ability. Therefore, they were not responsible for whether the enterprise would repay the principal and interest of the bond. The risk of bond purchases are still at the risk of the buyer.

By Hoài Anh/Thanh Thuy

Related News

The Minister of Finance chaired the Vietnam - Korea Financial Investment Promotion Conference

The Minister of Finance chaired the Vietnam - Korea Financial Investment Promotion Conference

VCN - On March 7, in Seoul Capital, South Korea, the State Securities Commission (SSC) organized a financial investment promotion conference with the theme "Vietnam - Investment destination". Minister of Finance Ho Duc Phoc attended and chaired the Conference.
Many real estate businesses face difficulties of cash flow

Many real estate businesses face difficulties of cash flow

VCN - Although many policies to overcome difficulties have been put forward by the Government, ministries and branches but many real estate businesses face the situation of being "thirsty for money". Finding solutions to unlock capital sources for the real estate market to promote recovery and development is essential.
Export growth supports the economy and stock market

Export growth supports the economy and stock market

VCN - Vietnam's export growth is on the recovery path, thereby becoming a positive signal for the economy as well as the stock market in 2024.
Securities attractive investment channel

Securities attractive investment channel

VCN - According to experts, with recent developments in the stock market, it can be seen that securities are currently an attractive investment channel.

Latest News

Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially during the peak month of tax settlement.
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

VCN - To complete the task from now until the end of 2024 and successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - With advantages such as being cheaper than domestic capital, and accompanied by many factors such as technology, skills, management, market... foreign capital is a popular trend among businesses. Domestic enterprises seek through M&A activities to ensure sustainable development for the future.

More News

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

VCN - Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

The Ministry of Finance continues to strongly improve the business environment, reducing the rate of businesses temporarily suspending operations

VCN - The Ministry of Finance aims to continue to strongly improve the business environment, create a healthy competitive environment, rapidly increase the number of newly established businesses, and reduce the rate of businesses temporarily suspending operations; reduce input costs and legal compliance costs in investment and business activities, reduce policy risks, strengthen trust, create a fulcrum for recovery and improve business resilience.
Vietnam tackles obstacles to stock market upgrade

Vietnam tackles obstacles to stock market upgrade

Vietnam's ambition to elevate its stock market from "frontier" to "emerging" status by 2025 faces two key hurdles, including pre-trade margin requirements for foreign investors and foreign ownership ratios in certain sectors, said Deputy Director of the Securities Market Development Department under the State Securities Commission (SSC) Pham Thi Thuy Linh.
Looking forward clear instructions in tax finalization in 2023

Looking forward clear instructions in tax finalization in 2023

VCN - Mr. Hoang Quang Phong (photo), Vice Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) discussed supporting taxpayers in tax finalization in 2023.
Proactive in dealing with exchange rate pressure

Proactive in dealing with exchange rate pressure

VCN - Recently, the State of Bank (SBV) withdrew VND 30,000 billion through the T-bills channel, contributing to reducing exchange rate pressure. This is just one of the moves of the monetary policy management agency to stabilize the foreign exchange market, contributing to supporting the macro economy as well as import-export business activities of enterprises.
Tax sector accompanies and supports tax finalization

Tax sector accompanies and supports tax finalization

VCN - In the first months of 2024, the Tax sector has deployed peak months to support tax finalization in many different forms, thereby solving many problems in settlement of corporate income tax and personal income tax for taxpayers.
Minister of Finance: Fairness and transparency for the insurance market

Minister of Finance: Fairness and transparency for the insurance market

VCN - According to Minister of Finance Ho Duc Phoc, the Ministry has strengthened inspections to correct violations in the insurance sector, demonstrating fairness and transparency in the market.
Vietnamese securities companies race to boost capital amid high market demand

Vietnamese securities companies race to boost capital amid high market demand

These companies understand the importance of boosting their capital to remain competitive and avoid falling behind their peers.
Central bank required to take urgent measures to stabilise gold market

Central bank required to take urgent measures to stabilise gold market

The Government has directed the State Bank of Vietnam (SBV) to urgently inspect and supervise to stabilise the gold market.
Read More

Your care

Latest Most read
Central bank urges card issuers to review procedures

Central bank urges card issuers to review procedures

The State Bank of Vietnam (SBV) has issued a directive, demanding commercial banks to review their procedures in issuing and managing bank cards.
Warning about impersonating tax authorities to commit fraud during  tax finalization month

Warning about impersonating tax authorities to commit fraud during tax finalization month

VCN - The Tax industry has continuously provided information and issued warnings about impersonating tax officials and tax authorities to commit fraud against taxpayers, but there are still people who fall into the trap of these fraudsters, especially dur
“3 priorities, 3 breakthroughs” in task deployment of State Treasury

“3 priorities, 3 breakthroughs” in task deployment of State Treasury

To successfully implement the State Treasury Development Strategy as planned, Deputy Minister of Finance Bui Van Khang stated "3 priorities, 3 breakthroughs" " and 7 notes in task performance.
Effectively apply M&A to go long distance

Effectively apply M&A to go long distance

VCN - Sharing at the conference "Consumer goods and distribution industry: M&A trends and investment strategies to raise capital for Vietnamese enterprises", organized by the Business Association of High Quality Vietnamese Goods and the Leading Business C
Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury proactively digitizes and transforms operating methods

Hanoi State Treasury always proactively transforms and reforms its operating methods with the motto of “taking customers as the center” and taking the satisfaction of organizations and individuals as a measured level of task completion by civil servants.
Mobile Version