Tighter regulations make public bonds more attractive

According to the CEO of S&I Ratings, stricter regulations in the long term will increase transparency and facilitate the absorption of supply. It is expected that the public bond issuance channel will continue to be active after the positive first quarter.

CEO S&I Ratings: Tighter Regulations Make Public Bonds More Attractive

According to the CEO of S&I Ratings, stricter regulations in the long term will increase transparency and facilitate the absorption of supply. It is expected that the public bond issuance channel will continue to be active after the positive first quarter.

Positive signals from the beginning of the year

Statistics from the beginning of the year up to now, there have been 7 issuing organizations that have completed the public offering of bonds with a successful distribution rate of over 90%. Of which, VPS Securities has mobilized the largest capital source from this channel (5,000 billion VND) from nearly 1,800 individual and institutional investors. Other organizations have also mobilized hundreds, thousands of billions of VND such as VietinBank (4,000 billion VND), SHB (2,350 billion VND), MB (nearly 2,200 billion VND), BVBank (1,254 billion VND) ...

Sharing with Dau Tu Electronic Newspaper in Bond Highlights Newsletter No. 3/2025, Ms. Hoang Viet Phuong - General Director of S&I Ratings - commented that the public bond market in the first months of the year is recording many positive signals. The amount of public issuance is higher than individual bonds and the issuance value has reached 45% of the total issuance for the whole year of 2024. At the same time, the average value of each issuance is also higher than previous quarters.

Public bond issuances since the beginning of the year (Unit: billion VND)
*LSTC: Reference interest rate is usually calculated by the average interest rate of personal savings deposits in VND, 12-month term, end-of-term interest of Agribank, Vietcombank, Vietinbank, BIDV on the annual interest rate determination date.

One of the reasons for the high rate of public bond issuance in the first quarter of 2025 is due to adjustments to the legal framework, most recently Law No. 56/2024/QH15, which took effect from January 1, 2025 and is awaiting specific guidance from the decree amending Decree 155/2020/ND-CP. Accordingly, from the beginning of 2026, professional individual investors will only be allowed to buy individual bonds with credit ratings and collateral or payment guarantees.

After a period of volatility, the legal framework continues to be improved to strengthen confidence and help the market develop sustainably. While on the one hand, regulations on professional individual investors are tightened, some regulations are also loosened, such as the addition of conditions that professional securities investors can include foreign investors without having to specify whether they are individual investors or institutional investors. This helps the market to welcome more potential capital from foreign investors.

Regarding public bond issuance, the market is waiting for amendments to the decree to reduce risks for investors when investing in this product. According to the draft new decree, public bonds will have to meet a number of requirements such as having a representative bond owner, regulations on debt ratio, issuance ratio on equity, as well as credit rating. These are necessary factors to put investment risks within a controllable framework, helping investors feel more secure when investing in this financial product.

“Increased controls and safety assurance will make corporate bonds, whether issued privately or publicly, a more attractive investment channel. Although they may have a strong impact in the short term, in the long term, these measures will improve transparency and create favorable conditions for absorbing bond supply in the coming time,” the General Director of S&I Ratings also emphasized.

Regarding bond supply, 2025 is expected to usher in a new phase of economic development, with a challenging growth target of 8%. To achieve this target, the economy needs long-term growth “locomotives”. Therefore, medium- and long-term capital sources will play an important role, helping businesses prepare for a new development cycle. Medium- and long-term loans are forecast to increase, financing infrastructure investment, public investment and real estate. Therefore, the demand for bond issuance this year is likely to increase significantly.

According to Ms. Phuong, bonds issued to the public are considered to be less risky than bonds issued privately and are being oriented to become an attractive product for individual investors. With the market recording signs of improvement in the first quarter of 2025, although this is usually the lowest period, the demand for issuance is expected to increase towards the end of the year. Therefore, the General Director of S&I Ratings believes that there is a basis to expect this growth trend to continue in the coming time.

Financial institutions "dominate" at the beginning of the year, potential of real estate and infrastructure groups

Ms. Hoang Viet Phuong – General Director of S&I Ratings

In the first quarter of 2024, the issuance ratio of banks and securities companies only accounted for about 25% of the value of bonds issued to the public. However, in recent months, this group has accounted for the entire issuance volume. According to Ms. Phuong, the group of financial institutions with the largest issuance volume is also because this product line is being welcomed by investors due to its relatively safe nature in the context of interest rates expected to decrease in the coming quarters.

In particular, bank bonds are highly valued, while these organizations have a need to issue Tier 2 bonds to support credit growth as well as improve capital safety ratios and limit the use of short-term capital for medium and long-term loans. Bonds of enterprises with clear cash flows and capital use plans, such as securities companies with cash flows that will be used for margin lending, are also well valued.

Besides the group of financial institutions that have been positively received by the market in recent times, Ms. Phuong predicts that the group of real estate enterprises will also have a large demand for bond issuance in the coming time.

According to statistics from S&I Ratings, in 2024, the debt-to-equity ratio of listed real estate enterprises increased to 0.66 times - the highest level since 2018. In addition to the pressure of large bond maturity, real estate enterprises also need to mobilize capital to prepare for project development plans in 2025.

Although in terms of revenue and profit, real estate businesses have only recorded initial signs of recovery in 2024, many businesses in the industry have proactively increased their borrowing early to create the necessary financial resources for launching projects to the market this year. This development shows that the pressure on cash flow and the need to issue bonds of the real estate sector in 2025 will be very noticeable. Real estate businesses with good foundations can take advantage of this capital mobilization channel.

According to Ms. Phuong, many provinces and cities are currently in the process of restructuring and re-planning, especially in the infrastructure sector. This poses a great demand for long-term capital, lasting from 8-10 years, or even longer. In that context, infrastructure bonds are expected to become an important capital mobilization channel and receive much attention in the coming time. This will be a financial product that will be mentioned a lot in the coming time, meeting the need for long-term investment and supporting the process of sustainable infrastructure development.

Source: https://baodautu.vn/ceo-si-ratings-quy-dinh-chat-che-hon-giup-trai-phieu-phat-hanh-ra-cong-chung-tang-hap-dan-d257171.html