Opening door to developing the corporate bond market – Final chapter: Recommending six solutions to achieve healthy growth

VCN - Talking to Customs News, Ketut Ariadi Kusuma, Senior Financial Sector Specialist of World Bank (WB), assessed that the corporate bond market development policy of Vietnam is on the right track. However, the legal framework and supervision need to keep improving.
Opening door to developing the corporate bond market – Final chapter: Recommending six solutions to achieve healthy growth
Ketut Ariadi Kusuma, Senior Financial Sector Specialist of World Bank (WB)

Could you tell us about the experience of other countries on corporate bond management?

The experience in corporate bond market management in each country was different because each country has its own conditions, characteristics and development orientations. However, countries that succeeded in developing the corporate bond market have acquired the following factors: the presence of a sufficient number of quality companies that have a real need to raise capital for development; the presence of domestic investors both organisations and individuals who have savings; supporting financial system with a strong legal foundation and good market orientation; strong legal framework and capital market management and supervision, including having credible supervisory organisations with sound strategies and effective market infrastructure.

Countries that were successful in developing the corporate bond market usually had three market channels: the public market, the private market, and the combined market.

In the public market, corporate bonds could be easily accessed by all investors, but high standards of information disclosure and credit quality were required to protect investors. On the other hand, in the pure private market, bonds were bought only by a small number of highly qualified investors who know the issuers well. Transaction in this market was not standardised because of depending on the specific needs of issuers and investors in each transaction. The combined market has some characteristics of the two markets mentioned above, it also had some regulations but was still relatively lax so as not to cause barriers to market access for issuers.

How do you assess the development of the corporate bond market in Vietnam?

Vietnam's corporate bond market already had all the factors with strong supply and demand. This was proved by the average annual growth rate of more than 40% over the years. The corporate bond market had grown, accounting for more than 15% of GDP in 2020 compared to 5% in 2015.

The policy on corporate bond market development was on the right track. The weaknesses in the legal framework creating legal loopholes have been fixed in the new Law on Securities and the decrees guiding on the implementation, otherwise it would create concerns about investor protection and hidden risks. The market had made a clear distinction between the public market,the listed market and the private market. However, the management and supervision of legal frameworks still needed to continue to be improved in the future.

What recommendations do you have for Vietnamese authorities for the development and management of the corporate bond market?

There are a number of areas that need improvement to further develop the corporate bond market.

Firstly, it is necessary to have a consistent bond issuancce process in the public market. Currently, retail investors often do not have extensive knowledge of bonds as well as bond issuers, so they need approval from the State Securities Commission, before corporate bonds are sold to the public. The approval process that took 3-6 months could reduce the attractiveness of corporate bonds, so the approval time should be reduced to a minimum. The bond issuance approval process also needed to be synchronised with the listing approval process at the Stock Exchange so that the bonds could be traded immediately after issuance. If there was a delay, it should be a few days.

Secondly, it was necessary to improve comprehensive disclosure standards of the issuer as well as corporate bonds to improve the decision-making process of investors. The information disclosure on the private bond market needed to be improved because this market was less transparent and standardised.

Thirdly, it needed to use credit ratings to improve transparency. The more transparent companies are, the better credit ratings, and enterpises that have better ratings are more attractive to investors. Vietnam still had no credit rating of corporate bonds, although several credit rating agencies have been licensed to operate. Furthermore, it was necessary to apply discrimination between rated corporate bonds and unrated corporate bonds to encourage the use of credit ratings.

Fourthly, there is a need to expand the investor base to be more diverse in both quantity and type, helping to increase the liquidity and attractiveness of the bond market. Currently, banks were still "monopolising" this market, but it had been seen an increase of individual investors entering the market. Promoting the development of investment funds and voluntary pension funds via a supportive management and policy framework for the market would help to develop the corporate bond market more effectively in mobilising savings for investment.

Fifthly, it was necessary to improve the organisation and liquidity of the secondary market. Special efforts to promote primary market functioning and transaction transparency might be important factors that need to consider. Centralised transaction information was also important, even when transactions were made through bilateral agreements or OTC (over the counter). Different trading systems can be used for bonds with different properties.

Sixth, it was necessary to encourage the development of new products and new tools to satisfy different capital mobilisation needs. For example, demand for infrastructure development in Vietnam is high, the development of a corporate bond framework for infrastructure projects would help to solve this problem. Similarly, the corporate bond market could be useful in alleviating pressures on the banking system via securitisation.

By Hương Dịu/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.
The corporate bond market will enter new period of development

The corporate bond market will enter new period of development

VCN – After recovering in 2023, the corporate bond market is predicted to see slow growth trend in 2024 due to the impact of stricter provisions of Decree 65 /2022/ND-CP. However, this will help investors enjoy benefits because it creates transparency, as well as the quality of issued corporate bonds.

Latest News

Efficiency from inspection and supervision - a key factor for a transparent stock market

Efficiency from inspection and supervision - a key factor for a transparent stock market

VCN - Since the 2019 Securities Law officially took effect, the average annual number of penalty decisions has more than doubled compared to the period 2015-2020. This shows that the strictness of the law is being enforced effectively.
SBV approves designation of 14 important banks in 2024

SBV approves designation of 14 important banks in 2024

The State Bank of Vietnam (SBV) has issued Decision No. 538/QD-NHNN approving the group of credit institutions and foreign bank branches which play an important role in the country's banking system in 2024.
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.

More News

“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.
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.
Read More

Your care

Latest Most read
Efficiency from inspection and supervision - a key factor for a transparent stock market

Efficiency from inspection and supervision - a key factor for a transparent stock market

VCN - Since the 2019 Securities Law officially took effect, the average annual number of penalty decisions has more than doubled compared to the period 2015-2020. This shows that the strictness of the law is being enforced effectively.
SBV approves designation of 14 important banks in 2024

SBV approves designation of 14 important banks in 2024

The State Bank of Vietnam (SBV) has issued Decision No. 538/QD-NHNN approving the group of credit institutions and foreign bank branches which play an important role in the country's banking system in 2024.
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.
Mobile Version