Attracting foreign capital into corporate bonds

The Securities Law (amended) taking effect from early 2025 is expected to "pave the way" to attract foreign capital flows into the corporate bond market.

The Securities Law (amended) taking effect from early 2025 is expected to "pave the way" to attract foreign capital flows into the corporate bond market.

Potential piece of cake

The Securities Law (amended) recently passed at the 8th Session of the 15th National Assembly has added a provision that “foreign organizations and individuals are also considered professional securities investors”. This provision paves the way for foreign investors to participate in investing in the Vietnamese corporate bond market.

According to the National Assembly's Finance and Budget Committee, the above regulation will increase the attraction of foreign investors to participate in the stock market and promote this market as a channel to bring foreign indirect investment capital into Vietnam.

Mr. Nguyen Khac Hai, Director of Law and Compliance Control, SSI Securities Corporation, also said that mobilizing more foreign investors to diversify the customer base participating in the corporate bond market is very necessary. According to Mr. Hai, there should be more specific guidelines to facilitate foreign investors to participate in this market.

Currently, foreign investors only hold about 3% of domestic corporate bonds. However, according to analysts, with the completion of the legal framework, the prospect of mobilizing foreign capital into this market is very large. "The potential for market expansion from foreign investors is very large, because they have experience, financial potential and high risk tolerance," said the FiinRatings analysis team.

However, Mr. Nguyen Quang Thuan, General Director of Fiin Ratings, pointed out the fact that most funds worth hundreds of billions of USD when investing in emerging markets like Vietnam choose the form of investment trust. However, Vietnam is lacking financial institutions and professional investment management funds. Therefore, Mr. Thuan believes that it is necessary to promote domestic investment funds.

In addition, to attract investors to the corporate bond market, in addition to continuing to standardize information transparency, diversify goods, implement credit rating activities; form a legal framework for bond underwriting companies and build a soft foundation (yield curve, default history, etc.).

Some open-end funds said they have received many requests to participate in the corporate bond market in Vietnam, but after researching, they are hesitant because the number of rated corporate bonds is still small. In addition, data on corporate bonds, especially data on the probability of bond default, is not yet available, making it difficult for foreign investors to manage risks for their investments.

Market liquidity will be more vibrant

Not only does it “pave the way” for foreign investors to participate more in the corporate bond market, the Securities Law (amended) also has stricter regulations on the subjects participating in the individual corporate bond market. Accordingly, individual professional securities investors are only allowed to buy, sell, and trade individual corporate bonds in two cases: enterprises issuing individual corporate bonds with credit ratings and collateral; enterprises issuing individual corporate bonds with credit ratings and payment guarantees from credit institutions.

Need to develop institutional investors

- Mr. Nguyen Quang Thuan, General Director of Fiin Ratings

Currently, institutional investors, including investment funds, insurance companies, and voluntary pension funds, own less than 10% of the value of outstanding bonds. Therefore, it is necessary to amend regulations to develop institutional investors.

Specifically, financial institutions should be allowed to participate more deeply in the corporate bond market based on the risk-based investment management framework (Risk-Base Capital). In addition, it is necessary to move towards applying risk-based asset allocation to insurance companies, credit institutions, etc.

Mr. Nguyen Khac Hai believes that the above regulations will help ease the psychology of investors in this market. The changes help “pave the way” for investors to return to the market, stimulating the inherent excitement of this capital mobilization channel.

Meanwhile, Mr. Ngo Thanh Huan, CEO of FIDT, said that the above regulation does not affect market liquidity. The reason is that after the "incidents" in the corporate bond market in the past two years, "virtual" professional individual investors no longer exist. In the long term, this regulation will make the corporate bond market develop more healthily and substantially.

Although positively assessing the impacts of the Securities Law (amended) on the corporate bond market, Dr. Le Xuan Nghia, an economic expert, said that the challenges facing the market are still very large. To solve the current difficulties in this market, the first thing to do is to resolve the large real estate projects that are being "shelved" in provinces and cities. In addition, there needs to be solutions to attract more foreign investors and institutional investors to participate in the corporate bond market.

Source: https://baodautu.vn/hut-von-ngoai-vao-trai-phieu-doanh-nghiep-d232144.html