Bond market develops asymmetrically, investors bear the risk

This week, the Ho Chi Minh City People's Court will bring the case of Truong My Lan and her accomplices to trial in phase 2. In addition to the violations of the issuing company, the case also adds a warning bell about the asymmetric development taking place in the bond market.

Market dominated by private placement bonds, absent public placement bonds

Public bond issuance is sluggish, investors lack choice

According to statistics from the Vietnam Bond Market Association, in the first 8 months of this year, public bond issuance accounted for only 9.55%, the remaining 90% were private bonds. The market is dominated by private bonds, lacking public bonds, while most individual investors lack the ability to analyze bond codes.

The asymmetric development is causing many liquidity risks for the corporate bond market. According to Mr. Hoang Van Thu, Vice Chairman of the State Securities Commission, the losses from recent violations in the market have fallen on the group of investors with limited opportunities to assess risks.

The series of violations in the private bond market in recent times has caused investors to lose confidence. To improve this situation, Dr. Le Xuan Nghia, an economic expert, said that it is necessary to promote the issuance of bonds to the public. However, currently, the procedures for issuing bonds to the public are quite complicated and take a long time, discouraging issuing enterprises. Therefore, if the legal procedures for public issuance are not reformed, the bond market will be congested.

“As far as I know, there are still many backlogs of public bond issuance dossiers. This is partly due to the limited number of management agency personnel and partly due to the complicated procedures for public bond issuance,” said Dr. Le Xuan Nghia.

On this issue, the State Securities Commission agrees with the view that it is necessary to focus on promoting the public offering of corporate bonds in conjunction with listing. However, the leader of the State Securities Commission believes that accelerating the issuance of bonds to the public depends not only on the will of the management agency, but also on the efforts of the subjects in the market.

“The State Securities Commission is amending legal regulations to shorten the time for evaluating dossiers. The proposed solution is to improve the quality of dossiers, increase the presence of consulting organizations, and increase the responsibility of the issuing organization when preparing dossiers. To shorten the time for evaluating dossiers and increase product quality, the State Securities Commission alone cannot do it, it requires the contribution of all participating entities,” said Mr. Hoang Van Thu.

Only institutional investors should invest in individual bonds.

According to economic experts, only institutional investors with the capacity to analyze, forecast and manage risks should invest in individual bonds. To minimize risks, individual investors should only invest in bonds issued to the public or choose to invest in bond funds.

Individual investors should not be encouraged to purchase individual bonds.

- Mr. Nguyen Quang Thuan, General Director of FiinRatings

Experience from other countries in the world and the reality of Vietnam should not encourage individual investors to buy individual bonds, this is a channel we must regulate if we do not want to leave big consequences. However, to develop institutional investors, in addition to focusing on the main infrastructure (policies, legal framework, transparency), soft infrastructure (trading on listed floors) must also follow international practices.

In fact, currently, other institutional investors such as insurance companies, pension funds, investment funds, securities companies, etc. investing in new bonds account for a very small proportion. In the first 8 months of this year, banks are still "alone" in the bond market - both on the issuer and the buyer side - showing that market confidence has not yet returned.

“The amount of bonds issued increased, but mainly bank bonds. Banks were also the main buyers (63.2%), showing that investor confidence has not yet recovered, not only individual investors but also institutional investors,” said an analyst at Mirae Asset Vietnam Securities Company.

Mr. To Tran Hoa, Deputy Director of the Securities Market Development Department (State Securities Commission) said that low liquidity reduces the attractiveness of corporate bonds, especially for institutional investors. Although the corporate bond market in Vietnam has made significant progress, there are still many issues that need to be resolved to ensure sustainable and stable development.

According to the representative of the State Securities Commission, the National Assembly has given permission and the Ministry of Finance is submitting a law to amend 7 laws, including the Securities Law. In the near future, there will be regulations guiding small investors to invest in securities (stocks, bonds) through funds and professional institutional investors. At the same time, the State Securities Commission will strengthen the activities of funds, or may open more funds to increase professionalism.

Source: https://baodautu.vn/thi-truong-trai-phieu-phat-trien-bat-doi-xung-nha-dau-tu-ganh-rui-ro-d225010.html