Rare mobilization, many maturities
During the past May, almost no enterprises announced successful bond issuance.
On May 31, information from the Hanoi Stock Exchange showed that Nui Phao Mineral Exploitation and Processing Company Limited announced that it had successfully issued 4 corporate bond lots (TPDN) with a total value of VND 2,600 billion. All 4 bond lots have a term of 60 months and the issuance was completed on May 25. Thus, this is the only rare company that successfully issued TPDN in the past May.
In April and May, few businesses were able to raise capital through the bond channel.
Similarly, in April, the market also recorded only 1 private corporate bond issuance and 1 public issuance with a total issuance value of 2,671 billion VND. Thus, during the past 2 months, enterprises have been almost unable to mobilize new capital through the bond channel, while still having to find ways to repay the number of bonds due.
Statistics from VBMA - Vietnam Bond Market Association show that the value of corporate bonds maturing in June was VND 35,319 billion, VND 12,295 billion more than in April; the value of corporate bonds maturing in July was VND 26,565 billion; in August it was VND 33,747 billion and the peak was in September with VND 40,988 billion... The total value of corporate bonds maturing from June to December 2023 is nearly VND 200,000 billion. The real estate group leads in terms of maturity value with more than VND 100,000 billion, followed by the banking group with more than VND 31,000 billion, and the rest are other enterprises. In addition, to create trust for bondholders, many enterprises are also continuing to spend thousands of billions of VND to buy back bonds before maturity. Specifically, in May, enterprises bought back VND 17,206 billion of bonds, an increase of 31% over the same period in 2022. The total value of bonds bought back by enterprises before maturity accumulated from the beginning of the year to date reached VND 68,130 billion (an increase of 62.4% over the same period in 2022).
Since the beginning of the year, to remove difficulties for corporate bonds, the Government has issued many policies; in which, Decree 08/2023 on amending, supplementing and suspending the implementation of a number of articles in the Decrees regulating the offering and trading of corporate bonds has created a legal corridor to remove some bottlenecks for the market. The Decree allows issuers to negotiate with bondholders to extend the payment period as well as temporarily suspend the implementation of a number of regulations on professional securities investors, credit ratings for bond-issuing enterprises, etc. That has helped about 30 companies recently reach agreements to extend the debt repayment period with bondholders. However, basically, the market has not been able to recover.
Need for corporate bond trading floor
Financial expert - Dr. Nguyen Tri Hieu said that investors' confidence in the corporate bond market has not yet recovered after the incidents in 2022. Investors are still like birds afraid of curved branches, so no one dares to spend money to buy corporate bonds. This gloomy situation will continue to put many businesses at risk of bankruptcy because negotiations to extend the payment period for bondholders can only take place once and most of them last for another 6 months or 1 year. By then, many investors will no longer have enough patience to continue to give businesses an extension. Therefore, he recommended that the Government should consider allowing businesses to postpone debt payments for a period of 2 years. At the same time, the State Bank needs to boldly encourage commercial banks to participate in buying corporate bonds for issuers operating in the manufacturing sector or businesses that still have feasible projects.
According to a report by VNDirect Securities Company, the demand for issuing corporate bonds is forecast to increase sharply when the amount of bonds maturing in 2023 and 2024 reaches VND 679,300 billion, equivalent to 49% of the total value of corporate bonds in circulation in December 2022.
Dr. Le Dat Chi, Head of the Finance Department - Ho Chi Minh City University of Economics, emphasized: Building investor confidence is a long-term issue, it cannot be done overnight. In fact, it is estimated that the largest buyers in the corporate bond market are banks and financial institutions, accounting for more than 70% of the value. However, currently, when the State Bank is still tightening credit room, commercial banks will find it difficult to participate strongly in the corporate bond market. Not to mention that many banks have almost run out of allocated room or have to spend money to buy back their own bonds. Therefore, in the short term, this market will continue to be gloomy, and issuing companies will have difficulty finding buyers.
Besides, currently when looking for information about corporate bond issuances, we only see sketchy announcements, and we cannot know what kind of collateral the bonds are. Or the regulation that only professional investors are allowed to participate in corporate bonds is a bottleneck to reduce buyers in the market. While the nature of the corporate bond channel is for enterprises to mobilize capital from the people to put into production and circulate in the economy.
Therefore, in the long term, the Government must implement many synchronous solutions to develop the corporate bond market. That is to accelerate the construction of a bond trading floor similar to stock trading. Then, professional investors will be developed. Not only individual investors will learn by themselves when they want to participate, but enterprises with idle money will not only choose to deposit money in banks but can buy corporate bonds on the floor and sell them when needed. Even banks when investing in corporate bonds will gradually separate into investment banks as prescribed by many countries.
"The corporate bond channel or debt market is the highest level of the financial market with a trading scale 10 times larger than the stock market. Investors will need a trading floor to buy and sell in order to boldly invest money. Because if they buy, but cannot sell when needed, it will reduce the attractiveness of corporate bonds. In my opinion, the corporate bond trading floor is simpler than stocks. While we have organized and operated the stock market for more than 20 years, we still do not understand why there is no bond trading floor? Only when there is a trading floor will the market begin to develop more strongly, truly contributing to the goal of promoting economic development," said Dr. Le Dat Chi.
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