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Real estate bonds to be controlled

09:56 | 29/04/2022

VCN - In order to ensure the safe and transparent development of the corporate bond market and the real estate corporate bond market, credit ratings for bond issuers are a must. Moreover, the management agency should develop an effective inspection mechanism for bond issuers from the submission of the application.

Complete legal framework for private placement of corporate bonds Complete legal framework for private placement of corporate bonds
Capital mobilisation through corporate bonds may decrease sharply Capital mobilisation through corporate bonds may decrease sharply
Insecurity with real estate bonds Insecurity with real estate bonds
Real estate corporate bonds are constantly growing
Real estate corporate bonds are constantly growing


Real estate corporate bonds are growing

The corporate bond market has continued to attract attention. The Ministry of Finance is requesting the State Securities Commission (SSC) to continue strengthening the inspection and supervision of issuance enterprises, consulting organizations, agents, and service providers for corporate bond offerings to promptly rectify and prevent violations.

Also, the Ministry of Finance has proposed narrowing regulations on the purpose of issuing corporate bonds to limit the round-trip capital transfer, causing a lack of transparency and difficulties for investors when assessing the risks of bonds and issuers.

According to the Vietnam Association Of Real Estate Brokers, after the SSC requested to cancel nine lots of bonds valued at over VND10,000 billion issued by Tan Hoang Minh Group, the corporate bond market experienced a new turning point under many controls and warnings from the authorities.

Along with that, in the first half of April, the Prime Minister issued more documents requesting relevant agencies to rectify and stabilize the operation of the corporate bond market in a safe, transparent and efficient manner.

As reported, the corporate bond market has experienced four years of strong development. It is noteworthy that real estate corporate bonds have continuously grown in the past few years when investors have prioritized using bond capital mobilization rather than capital sources from banks or investors, customers.

Corporate bonds have experienced four years of strong development, especially, in 2021, the corporate bond market size is equivalent to 16.7% of GDP, accounting for nearly 12% of the country's credit balance in 2021.

Real estate enterprises have surpassed banks, ranking first in value of corporate bonds issued in 2021, accounting of 35% of the total value of issued corporate bonds.

"However, nearly half of real estate corporate bonds were unsecured. Collateral is not mandatory, but it is a condition that creates the reputation of issuers and issued corporate bonds to ensure the safety of bondholders," said the Vietnam Association of Real Estate Brokers.

What makes market regulators worry about the corporate bond market in general and real estate corporate bonds, in particular, includes enterprises using bonds for improper purposes, leading to risks for bondholders; loss-making enterprises provide incomplete information to bondholders.

Effectively control bond issuance activities

However, according to the Vietnam Association of Real Estate Brokers, in the long run, corporate bonds are still an effective capital mobilization channel, demonstrating the dynamism of an economy, and giving investors diverse investment opportunities.

“The corporate bond market in general and the real estate corporate bond market in particular need a unified and effective solution for healthy development,” the Brokers Association said.

According to this association, the concerns of state management agencies often stem from information asymmetry between enterprises and investors (including individual and institutional investors). Therefore, the credit rating for bond issuers is necessary to help investors have an objective overview to assess possible risks when investing in enterprises through bonds.

In addition, the relevant authorities, especially the Ministry of Finance and the SSC, need to develop an effective inspection mechanism for bond issuers from the submission of applications to limit the detection of violations and cancelation of successful deals, causing psychological disturbance to the market.

Regarding this issue, Ho Chi Minh City Real Estate Association said the unit has recommended the real estate business community commit to implementing real estate investment activities, mobilizing capital sources and using mobilized capital in accordance with the law, in the harmonization of legitimate interests of enterprises, investors, customers and the common interests of the social community.

The association proposed to build a roadmap to effectively control the issuance of corporate bonds in accordance with international practices and Vietnam's practice, which can be applied from the beginning of 2023 so that enterprises have time to adjust their investment activities and capital mobilization.

Advising on the issuance of Government bonds and mobilizing capital for the economic recovery program Advising on the issuance of Government bonds and mobilizing capital for the economic recovery program

The reason is that the capital mobilized from bonds is an extremely important capital channel for the economy to make up for the shortfall in credit capital because the State Bank is implementing a roadmap on reducing credit in potentially risky areas, including real estate, while our country's capital market has not developed harmoniously and synchronously with a modest scale.

As of mid-April 2022, the total value of issued corporate bonds reached nearly VND40,000 billion. In which, more than half of bonds was issued in January and the issued real estate corporate bonds in the first quarter of 2022 accounted for 43%.

By Hoai Anh/ Huyen Trang