Looking for an investment channel

Recently, Mr. Nguyen Van Tam in District 2, Ho Chi Minh City is looking for a better investment channel. He is considering corporate bonds, where the yield is much higher than the interest rate on bank deposits. What Mr. Tam is interested in is finding a large, stable enterprise with low risk of bankruptcy in the next 5 years, with a steady cash flow to pay interest and principal on the bonds.

Mr. Tam is an investor in the real estate market and has won big in this field.

Over the past 10 years, Mr. Tam has made a lot of money from plots of land in some prime areas in Saigon such as Thao Dien, Thu Thiem,... Later, he also made a lot of money from stocks, then invested in a few plots of land near Long Thanh airport and in District 9 across from Vinhomes Grand Park... as well as having a relatively large amount of money deposited in the bank when interest rates were still high to retire early.

Recently, bank interest rates have been quite low, this investor is thinking about returning to the stock market but after trying several times and making wrong predictions, he does not dare to take the risk.

Recently, many investors have encountered difficulties as investment channels have become unpredictable. The price of SJC gold bars, after reaching a historical peak of VND92.5 million/tael on May 10, has turned down by VND15 million/tael, down to less than VND77 million/tael according to the selling price of 4 state-owned commercial banks.

The rapid decline in gold prices has slowed down investment/hoarding activities. In addition, buying gold is also difficult if you want to buy in large quantities. There are many regulations limiting the buying and selling of gold, and the government may soon impose taxes.

Bank interest rates have been pushed up slightly but remain low, mostly below 5% per year.

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Corporate bond market is less gloomy. Photo: CP

Meanwhile, real estate prices are rising in many areas. Mr. Tam is looking for a place on the outskirts of Hanoi - where the population density is very high and the prospect of price increases in the long term. However, since the beginning of the year, the price of apartments and land here has increased sharply by 20-50%. In some places outside the 3rd ring road, the price of villas is up to 1 billion VND/m2, 500m2 costs more than 500 billion VND, equal to land in the Old Quarter.

Land prices in Da Nang are also high but the outlook is less bright. In Ho Chi Minh City, the real estate market is said to be quite quiet.

In fact, the number of individual investors who want to invest in corporate bonds is not much after incidents such as Tan Hoang Minh, Van Thinh Phat,... Regulations on professional investors are also quite strict.

However, the corporate bond market has more positive signals in the context of a lack of attractive investment channels.

Corporate bonds: More positive, but with potential risks

Recently, according to the Hanoi Stock Exchange (HNX), many businesses reported successful issuance of bonds.

On May 31, the F88 mortgage lending service chain successfully issued its third batch of bonds since the beginning of 2024, with a term of 1 year, collecting a total of 3 batches of 150 billion VND with an interest rate of 11-11.5%/year.

Previously, in mid-May, Vingroup Corporation (VIC) of billionaire Pham Nhat Vuong successfully issued a bond lot worth VND2,000 billion, with a term of 24 months and an interest rate of 12.5%/year. In less than two months, Vingroup completed its plan to raise VND8,000 billion from bonds through four issuances. Vinhomes Corporation (VHM) also has a bond lot worth VND2,000 billion, with a term of 2 years and an interest rate of 12%...

It is not yet known how corporate bond issuance will be in 2024, but this capital mobilization channel is of great interest to the Government to help the economy develop more sustainably in the long term. In 2023, the value of real estate corporate bonds issued will increase by more than 40% compared to 2022.

In the first 5 months of 2024, according to the Vietnam Bond Market Association (VBMA), the total value of corporate bond issuance increased by 71% over the same period, to nearly 60 trillion VND. The amount issued to the public reached nearly 8,900 billion VND, the rest was issued privately.

It can be seen that the corporate bond channel has recently attracted the attention of investors, including professional individual investors. The interest rate of 11-12%/year, more than twice that of bank savings, is really attractive to many people. The stock market is still quite sluggish, still around the threshold of 1,200-1,300 points.

It is normal for money to move from low-yield to high-yield areas. In China, people have been withdrawing money from banks since the beginning of the year and investing in corporate bonds and wealth management products.

In Vietnam, the movement of money flows has been much slower after the above shocks. After the boom year of 2021, confidence in the corporate bond market has been shaken. The government has been taking many measures to revive this market.

However, the corporate bond market still has many potential risks. In recent times, the main bond issuers have been banks and real estate companies. Many real estate companies are still facing difficulties and are facing a large amount of bonds maturing this year.

According to the Ministry of Finance, the outstanding real estate bond debt is more than 351,000 billion VND. In 2024, there will be 92 real estate enterprises with corporate bonds maturing, with a total maturing debt of more than 99,500 billion VND. Many real estate giants have large bond debts such as: TNR Holdings Vietnam about 9,300 billion VND, Hano-vid Real Estate JSC about 9,500 billion VND, Novaland 6,500 billion VND...

According to FiinRatings, the debt repayment pressure on real estate issuers in 2024 and 2025 is quite large, especially for bonds with delayed principal/interest payments with original maturity dates in 2022 and 2023 and restructured for a maximum of 2 years according to Decree 08/2023. Challenges still exist when the market has not fully recovered and policy changes have a certain delay, leading to businesses not being able to arrange cash flow to repay debt.

Mr. Nguyen Quang Thuan, General Director of FiinRatings, previously said that the corporate bond market still faces many difficulties. The scale of this channel is still small, only about 11% of GDP by the end of 2023, quite far from the target of 20% of GDP by 2025.

According to some experts, it is now very difficult to issue corporate bonds with long terms of 5-7 years as before, instead the terms are quite short, mainly 12-24 months.

After a 'soft landing', the corporate bond market is gradually warming up. The corporate bond market in 2024 will continue to improve its institutions and is forecast to enter a new stage of development, more effective, safe and sustainable after a difficult year.