VietNamNet Bridge – Corporate bonds have become the “hotter than ever” investment channel, with $1.4 billion worth of bonds sold in the first nine months of the year.

The recent corporate bond issue campaigns succeeded surprisingly. The number of buyers and the amount of bonds registered by investors were both higher than the initial expectations.

In late August 2013, the Vietnam Coal and Mineral Industries Group (Vinacomin) successfully issued VND5 trillion worth of bonds, which was 1.7 times higher than the expected amount (VND3 trillion).

Meanwhile, earlier this year, the group also successfully issued VND2.5 trillion worth of bonds.

According to Nguyen Van Bien, Deputy General Director of Vinacomin, more than 10 institutional investors, including commercial banks and fund management companies, registered to buy the bonds. Of these, nine institutions purchased the bonds, or as twice as the number of buyers in the 2012’s bond issue campaign.

Vinacomin may consider 2013 a lucky year, as the total value of the bonds issued by the end of August had far exceeded the total value of bonds issued in the five years before. In 2007-2012, the group could issue VND3.5 trillion worth of bonds.

Also in August 2013, the Bank for Investment and Development of Vietnam (BIDV) successfully issued 10-year bonds, fulfilling 105 percent of the plan (VND3 trillion). Prior to that, the bank only hoped it could issue VND2 trillion worth of bonds after a survey in the second quarter.

The bond interest rates offered by both Vinacomin and BIDV were much lower than that in the first months of the year. Vincomin bonds interest rate is 11 percent for the first two years, while BIDV’s 10.5 percent.

Taking advantage of the success, enterprises are considering issuing more bonds right in 2013, the thing which rarely happened in the market in previous years.

Vinacomin, for example, is considering another bond issue campaign with the bond value of VND2 trillion at minimum.

Sources said the bond issuance would be carried out later this year, while the bonds would be sold to a partner of the group, which did not buy bonds in the August campaign.

Bien of Vinacomin declined to give more details about the issuance, but confirming that Vinacomin still can see the high demand for making investment in bonds.

The corporate bond market in 2013 is quite different from it last year. In 2012, banks kept reluctant to pour money into the investment channel and always required high interest rates.

Meanwhile, banks now rush to buy corporate bonds, especially the bonds of big enterprises, at decreasingly low interest rates.

Vinacomin, for example, could sell only VND500 billion worth of bonds in late 2012, while it offered to sell VND2.5 trillion, with the interest rate of 14.5 percent for the first year. Meanwhile, the interest rate was lower in the August issuance campaign, at 11 percent.

According to BIDV, the total corporate bond value issued in the first nine months of the year was VND28.1 trillion, a sharp increase from the VND17 trillion worth of bonds issued in the whole year 2012.

With at least three corporate bond offers (VND2 trillion for each) to be made, the total value of bonds to be issued in 2013 may reach VND34 trillion, or double that in 2012.

Mai Chi