With bright spots appearing in the first quarter of 2024, experts and businesses expect the corporate bond market to be more vibrant from the second quarter.
Trading is more active, banks issue bonds again
According to Saigon Ratings, in the first quarter of 2024, businesses successfully issued about VND20,000 billion worth of bonds, with terms from 3 to 5 years, down about 30% compared to the same period in 2023.
Although corporate bond issuance decreased compared to the same period last year, there were new positive points. Accordingly, the issuance volume improved significantly each month. The amount of corporate bonds issued in March 2024 was 3 times higher than the previous two months combined.
Public bond transactions reached VND 6,700 billion in March 2024, with average liquidity reaching VND 334 billion/day, up 8.4% compared to February 2024. This is a bright spot in the market.
Most of the new issuance in the first quarter of 2024 came from the residential real estate sector. However, from the end of March 2024, the bank also started issuing bonds again with the participation of MB. From the end of March to the beginning of April 2024, MB consecutively issued 7 bond tranches, with a total value of nearly 2,450 billion VND, with a term of 7-10 years, with the ability to increase Tier 2 capital.
Bond trading in the secondary market is also more active. According to the Vietnam Bond Market Association, in the secondary market, the total value of individual corporate bond transactions in March 2024 reached VND91,120 billion, up 51.8% compared to February 2024. Most of the most traded bonds were issued by the commercial bank group (accounting for more than 55% of the total transaction value in the secondary market).
“We expect issuance activities to be active again in the following months, especially from the second quarter of 2024,” FiinGroup's report said.
Meanwhile, Mr. Nguyen Dinh Duy, financial analyst at VIS Ratings Company, said that the corporate bond market in March had many positive developments thanks to improved credit prospects, a decrease in the value of newly arising late principal/interest payments, debt restructuring and increased new issuance value compared to February 2024. The fact that some previously late-payment bonds have been paid to bondholders (such as the case of Hung Thinh Investment Joint Stock Company) also reduced bad debt on bonds.
15% of bonds still face high risks, the market will be brighter in the second half of the year
According to the Vietnam Bond Market Association, 7 enterprises announced late payment of principal and interest in March 2024, with a total value of about 4,851 billion VND (including interest and remaining outstanding debt of bonds) and 27 bond codes had their interest and principal payment period extended or the time for early bond repurchase.
- Mr. Nguyen Dinh Duy, Financial Analyst of VIS Ratings
“We estimate that about 10% of the bonds maturing in April 2024 are high-risk (about VND3,000 billion), lower than in March 2024. In the next 12 months, there will be VND235,000 billion of corporate bonds maturing, 15% of which are high-risk bonds,” Mr. Nguyen Dinh Duy estimated.
FiinGroup statistics show that the yield to maturity of bonds currently fluctuates at 6-8% for bonds of large banks, 9-12% for non-financial enterprises. In particular, many corporate bond lots are traded with an average yield to maturity of over 20%, such as the bonds of Sunshine AM (20.18%), Licogi 13 (27.6%) and Bkav Pro (26.79%). This reflects the price reduction of bonds of enterprises considered to be high-risk traded on the market.
As of the end of March 2024, there were still VND1.24 trillion of corporate bonds outstanding, of which VND1.1 trillion were individual bonds. The real estate bond group with a balance of nearly VND400,000 billion was warned the most about the risk due to high inventory, high prices, and uncleared cash flow.
Mr. Phung Xuan Minh, Chairman of the Board of Directors of Saigon Ratings, said that the pressure to repay corporate bonds due in the market in the remaining months of 2024 and the coming years is very large, about VND 210,000 billion in 2024, more than VND 305,000 billion in 2025 and VND 220,000 billion in 2026.
“We expect that the gradual improvement of the macro environment will increase investment activities and the need for long-term capital mobilization. We also forecast that the bond market will be more active in the coming quarters, the low interest rate environment will support the bond investment channel and the implementation of Decree 65/2022/ND-CP of the Government will create conditions for the bond market to develop with better quality, stability and sustainability in 2024,” said Mr. Phung Xuan Minh.
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