The committee has released a report on assessing the results of the National Assembly Resolution on the socio-economic development plan in 2024.

Regarding the bond market, the committee said despite recent improvements, the market is still facing difficulties to be an effective medium- and long-term capital mobilization channel.

The Vietnamese bond market witnessed a strong growth period in 2018-2021 with the annual growth rate of 45 percent per annum. However, it has declined since 2022 because of changes in business environment and legal framework, and violations of regulations on bond issuance.

The weakening of the role of corporate bond has posed a challenge for capital supply. 

Some problems of the bond market have been cited, including its small scale compared with demand for long-term capital from enterprises. The total outstanding balance of corporate bonds was just VND1 quadrillion in late August 2024, or 10 percent of GDP. The figure was much lower than Malaysia’s 54 percent, Singapore’s 25 percent and Thailand’s 27 percent. 

The issued bond structure is reasonable with privately issued bonds accounting for overly large proportion (88 percent), while public offering was modest (just 12 percent). This restricts enterprises’ capability to access capital from public investors.

There are also problems in the structure of investment. Most bondholders are commercial banks and individual investors, while professional financial institutions such as investment funds and insurance companies are not major bond buyers.

Because of these problems, the National Assembly’s Economics Committee believes that it is necessary to improve the bond market and develop it in a more sustainable, transparent and effective way.

The draft law that amends and supplements articles of the Law on Securities has been opened for discussions.

In addition to preventing the manipulating of securities by setting restrictions on individual investors’ transactions, to protect the market, the draft law (amended) requests the institutions issuing bonds publicly must have collateral or banks’ guarantee when applying for bond issuance licenses. The regulation doesn’t include the case where credit institutions offer bonds that are secondary debts satisfying requirements to be considered tier-2 capital.

The National Assembly’s Economics Committee has requested the compilation agency to carry out study on possible impacts that the tentative regulation on restricting individual investors.

Some economists believe that individual investors are major investors in the privately issued bond market, and therefore, if they are absent, the bond market will shrink, thus affecting liquidity and capital mobilization.

Tam An