What to do to restore trust in corporate bonds?

Vietnam's demand for capital mobilization through bonds is huge, but how to regain investor confidence after a series of recent incidents?

Mr. Phung Xuan Minh, Chairman of the Board of Directors of Saigon Ratings, talks about the current situation of the Vietnamese bond market - Photo: SR

Many "loopholes" in issuing corporate bonds

The 2024 Annual Conference of the Association of Credit Rating Agencies in Asia (ACRAA) was held today, December 6, in Ho Chi Minh City. Within the framework of the conference, a workshop was held with the theme "Initiative for Developing Asian Capital Markets". Here, the issue of capital mobilization through the bond channel was mentioned.

Speaking at the workshop, Mr. Phung Xuan Minh, Chairman of the Board of Directors of Saigon Ratings, Vietnam, said that by the end of 2023, corporate bonds accounted for 38% of the total size of the Vietnamese bond market, while government bonds accounted for 57% of the total size.

There was a period of strong growth, such as in 2019, the actual value of corporate bond issuance reached VND 378,507 billion, accounting for about 8% of GDP.

However, by 2022, the issuance value had dropped sharply to VND272,383 billion, equivalent to about 5% of GDP. By 2023, the corporate bond market began to recover with the issuance value reaching about VND349,976 billion, equivalent to 7% of GDP.

However, according to Mr. Minh, the rapid development of the corporate bond market also brings many challenges and risks.

One of the biggest challenges in Vietnam's corporate bond market is credit risk. Many businesses issue bonds but are unable to repay their debts on time.

In addition, many bond-issuing enterprises in Vietnam have not fully complied with information disclosure regulations. Financial reports lack transparency, are incomplete, or have not been independently audited.

This leads to the consequence of losing investor confidence.

The rate of enterprises issuing bonds to the public in the market is still very low compared to privately issued bonds (about 10%).

Meanwhile, credit rating of issuers and corporate bonds has not yet become a business cultural practice according to international practices.

C Strengthening investor confidence is the key

Experts all agree that credit ratings are very important to the development of capital markets in each country - Photo: SR

According to Mr. Phung Xuan Minh, Vietnam is facing a new stage of economic development, along with the development of the capital market.

However, due to the problems of the recent period, the corporate bond market in particular has encountered a crisis. Therefore, restoring and strengthening investor confidence is the key for the bond market to meet the large capital needs of the economy, and to be a medium and long-term capital channel for businesses.

The Chairman of Saigon Ratings believes that there are three issues to regain investor confidence in the bond market. First, the management agency's handling of negative incidents is gradually regaining investor confidence.

Second, this trust depends largely on the issuing organization. It must have a business plan, effective management and administration, and by all means keep its reputation, repay debts in full and on time as committed.

Third, consulting units need to clearly guide and advise investors about risk appetite, because each bond will have different levels of risk and profitability.

Accordingly, credit rating associated with collateral is a tool for issuing organizations to ensure investor confidence and peace of mind that the investment channel is secure and safe.

Recently, the amended Securities Law passed by the National Assembly with a number of regulations related to credit ratings is also expected to help overcome these issues.

Speaking at the conference, Mr. Atsushi Masuda, Chairman of ACRAA, said that since the annual conference in Thailand, members of the association have continued to affirm that credit ratings are very important to the development of capital markets in each country.

"When deciding to invest in a certain field, more data is needed to make quick decisions. This data is not only about the financial health and prospects of the business, but for credit rating agencies as well as investors, it is closely related to the market development policies of countries," he emphasized.

Source: https://tuoitre.vn/lam-gi-de-lay-lai-niem-tin-cho-trai-phieu-doanh-nghiep-20241206215405126.htm