According to current regulations, approximately 1,300 corporate bond codes should be listed within three months from when the system for independent business bond trading began operations on July 19 this year.

As of last week, only 9 per cent of over 110 bond codes have registered for trading, according to the Hanoi Stock Exchange (HNX). This falls considerably short of the target, with the October 19 deadline looming.

The remainder of bonds are still awaiting registration. “We’re actively pushing for this to meet the timeline,” said a senior leader at HNX.

Businesses issuing these bonds have been urged to expedite the process, as delays could see them excluded from off-floor trading. Currently, transactions mainly rely on private agreements between investors.

Despite a subdued market sentiment, real estate bonds account for more than half of the issued bonds. Notably, a significant portion of bonds registering for trading come from banks and securities companies.

The top entities by trade value over the past two months on HNX include VinFast, Vietcombank, BIDV, Luxury Living Business, Nam Long Investment, and Techcombank Securities.

Corporate credit rating officials believe that the timeline set for bond listing is challenging and market confidence is still in its nascent stages of recovery, with demand unlikely to surge immediately. Furthermore, limited options on the exchange suppress demand and the obligation to provide greater transparency possibly deters many from listing, questioning the quality of the offerings.

Nguyen Quang Thuan, chairman of Fiingroup, said that centralised declarations, together with information requirements for issuing entities and bond batches, would enhance market transparency.

“Bringing independent corporate bonds to the exchange will contribute to resolving liquidity issues when necessary,” Thuan said.

However, once over 1,300 lots of independent corporate bonds commence trading, high liquidity should not be expected for this system, he said. “Trade values on the independent bond exchange might be high, but we anticipate the transaction count to be low and not as vibrant as the stock market. The nature of bond investments is long-term. Institutional investors primarily purchase and hold until maturity,” Thuan added.

“Focusing on centralised trade sizes will address transparency, establishing clear investor identities swiftly. This is pivotal for investor protection and forming a corporate bond interest rate curve.”

A decree made in 2020 on sanctions in the securities market stipulated penalties for non-compliance with trading registration. Fines could reach around $17,000 for violations like exceeding the 12-month listing deadline or failure to register securities for trading and listing.

Last week, the Ho Chi Minh City Real Estate Association (HoREA) asked the prime minister and the Ministry of Finance to extend Article 3 of Decree No.08/2023/ND-CP, which covers corporate bond trading, by 12 months, until the end of 2024.

“Following a positive six-month run, Decree 08 has begun to showcase its effectiveness, addressing some challenges of the corporate bond market,” said Le Hoang Chau, chairman of the HoREA.

“This decree will undoubtedly continue to assist the corporate bond market in Q4 of 2023, which is set to be a peak maturity period of the entire year with a total value reaching $2.76 billion, nearly 80 per cent of which are real estate corporate bonds. Next year is set to witness an even more substantial maturity peak at roughly $13.9 billion,” he added.

Given these projections, Chau believes that the full application of Decree 08 throughout 2024 is crucial. If the specific regulations under Article 3 of this decree are not extended, bond issuances might face impediments from 2024, mainly because many companies and individual investors might not meet the decree’s criteria.

In addition, the HoREA identified a scarcity of credit rating advisory firms in Vietnam. The association thus urged the government to enhance the legal framework and foster the growth of international-standard credit rating agencies, comparable to global brands like Fitch Ratings.

Source: VIR