New bond issuance will recover, market develops more tightly

234 trillion VND of bonds will mature in 2024

The private corporate bond market witnessed a slight recovery in 2023 with the value of new issuance reaching VND345.8 trillion, up 8.6% over the same period. In particular, corporate bonds issued to the public witnessed remarkable growth, reaching VND37 trillion, up 74.6%.

In 2024, the value of corporate bonds maturing is estimated by FiinRatings to reach VND234 trillion, up 6.47% year-on-year. Of which, the real estate sector accounts for more than 41% of the maturity value, followed by credit institutions with 22.2%. Compared to 2023, the market will face an additional burden from the batches of bonds with delayed principal/interest previously extended through Decree 08, with an estimated value to be processed of VND99.7 trillion.

“The payment pressure of real estate enterprises is expected to be difficult to relieve when the market has not fully recovered, legal problems continue due to policy delays and businesses need time to rebalance their operating cash flow. The risk of late payment in the market will also increase due to some of the extended provisions in Decree 08 that have expired and pressure from bond issuances with buyback commitments in 2024,” said an expert from FiinRatings.

FiinRatings expects the corporate bond market in 2024 to enter a new phase of development in a more stringent direction with the application of higher requirements for all market participants, thereby helping new bond issuance activities gradually recover. Many regulations in Decree 65/2022/ND-CP, which will take effect in 2024, will establish stricter discipline for all stakeholders and support the restoration of market confidence. The large issuance demand of the banking group to supplement capital sources and meet financial safety indicators will lead the bond market in 2024.

Applying Decree 65 requires a roadmap to create a developing market.

According to Dr. Can Van Luc - Chief Economist of BIDV, the application of Decree No. 65/2022/ND-CP is necessary but requires a roadmap and balance to continue creating market development.

Decree 08/2023/ND-CP amends 3 conditions, in which the condition on the offering period of 60 days is still unaffected, but the most important is the condition on professional investors, which needs to be considered in more specific terms, whether to extend, and how to extend? If we want a healthy market, targeting the right buyers with knowledge, experience, and understanding, we will continue to apply the conditions and terms of professional investors according to Decree 65.

In addition, regulations on credit rating for businesses with issuers should have a more suitable roadmap. Currently, the country has only 3 credit rating organizations for businesses issuing bonds and more importantly, the culture and habits of issuers purchasing credit rating services have clearly not yet been formed.

Therefore, Dr. Can Van Luc believes that it is necessary to consider an appropriate roadmap for credit rating regulations and especially to classify groups according to which groups need credit ratings and which do not. For example, commercial banks do not need credit ratings because they issue for a very clear purpose of increasing tier-two capital, and secondly, they are strictly managed by the State for safety coefficients.

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