Increasing publicity and transparency are core issues to develop healthy the corporate bond market and protect investors.
In the context of slow growth of bank credit, commercial banks gradually reduce the rate of short-term capital mobilization for medium and long-term loans, the issue of bonds by enterprises is one of the solutions to supplement additional capital, financial restructuring.
However, there are some businesses issuing bonds with interest rates twice as high as bank deposit rates, increasing risks for businesses and investors. Therefore, increasing publicity and transparency in the issuance and listing of corporate bonds is a core issue to develop healthy the corporate bond market and protect investors.
Mr. Nguyen Hoang Duong – Deputy Director of Finance Department of Banks and Financial Institutions – Ministry of Finance said, according to the Hanoi Stock Exchange (HNX), in the first 6 months of 2019, the volume corporate bonds issued reached 89,483 billion VND, equal to 134% compared to the same period of 2018. By the time of June 24, 2019, the debt of corporate bond market reached 10.22% of GDP in 2018.
In the past years, the corporate bond market has developed positively. The size of the corporate bond market has so far exceeded the target set by 2020 in the Prime Minister’s Decision No. 1191 / QD-TTg dated August 14, 2017, approving the Roadmap for developing the bond market. 2017-2020 paragraph. The objective of Decision No. 1191 is the outstanding debt of the corporate bond market reaching 7% of GDP by 2020.
According to Mr. Nguyen Hoang Duong, the number of enterprises mobilizing capital in the bond market increased is a good signal to develop the corporate bond market in the context of slowing credit growth, commercial banks. step by step reduce the rate of mobilizing short-term capital for medium and long-term loans.
However, the size of Vietnam’s corporate bond market is still much lower than that of regional countries (20-50% of GDP).
Besides, compared to the size of the bank credit market, the size of the corporate bond market is small and there are differences, which shows that businesses still mainly mobilize capital through credit channels. Bank.
According to the analysis group from MB – MBS Securities Joint Stock Company, the banking sector accounts for the largest proportion in corporate bond issuance, followed by real estate, construction and infrastructure.
Mr. Le Hoang Chau, Chairman of HCMC Real Estate Association. Ho Chi Minh (HoREA) said that the State Bank’s implementation of the credit limit roadmap in real estate sector made bond issuance channel become important for real estate enterprises to supplement capital and structure. financial restructuring.
However, it is worrisome that real estate firms issue bonds with interest rates of up to 14.5%, double the interest rates of bank savings to attract people with excess money. This has increased the risk for those businesses and investors.
Developing corporate bond market: Determining the core points. Illustration
Mr. Chau recommended investors to pay special attention to the feasibility of projects of enterprises by basing on the reputation of investors, the prospectus of enterprises on the stock market periodically.
HoREA Chairman said, now conditions for issuing corporate bonds have more open points. Especially the regulation that enterprises want to issue bonds is not required to have profit in the preceding year, creating a motivation for enterprises to take the initiative in planning to issue bonds. However, this is a risk for secondary investors if they do not look carefully.
Deputy Director of the Department of Banking and Financial Institutions Nguyen Hoang Duong said, to increase publicity and transparency in the process of mobilizing bond capital, protecting investors’ interests, in Decree 163 / 2018 / ND – Government CP (Decree 163) on issuing corporate bonds has been regulated in the direction of strengthening information disclosure mechanism.
Previously, issuers only needed to publish information before issuing and announcing issuance results for investors who registered to buy bonds.
Currently, according to Decree 163, enterprises must disclose information to investors who register to buy bonds and disclose information on HNX’s information page, including information disclosure before its release, information on release results, periodic information and unusual information. HNX is an operating unit specializing in corporate bond information.
The disclosure of information for private placement is only within the scope for investors to register to buy bonds in accordance with the law. For bonds issued to the public, enterprises must disclose widely the information through the prospectus.
Mr. Duong said that the regulation on information disclosure for the issuance of individual corporate bonds in Decree 163 is consistent with international practice, in order to protect the legitimate rights and interests of investors.
Regarding the type of bonds, Decree 163 provides for non-convertible bonds, including guaranteed or unsecured bonds; for convertible bonds, including secured or unsecured bonds, bonds with warrants. Accordingly, depending on the capital mobilization requirements and the needs of investors, the issuer may choose to issue bonds with secured assets or no collateral.
In fact, some businesses have chosen to issue bonds with guaranteed assets. Notably, regardless of the type of bond to mobilize capital, the issuer must also disclose the full information on the financial situation, the basic conditions and terms of the bonds, the interests of bond owner.
In order to warn investors of risks for individual issued bonds, Decree 163 stipulates the distinction between issuing individual corporate bonds and issuing corporate bonds to the public.
In the coming time, at the amended Securities Law, the National Assembly has regulations on professional securities investors; at the same time orienting the private issuance of corporate bonds only for professional investors including professional investment organizations and professional investment individuals (with experience and investment knowledge or capacity financially) as international practice.
In addition, the State Securities Commission is currently reviewing to standardize the conditions and issuance process, facilitating businesses and shortening the time to approve the public release.
The amended Securities Law stipulates that enterprises issuing bonds to the public must be rated creditworthy. This regulation will promote the establishment and provision of credit rating services to support investors, especially individual investors when entering the corporate bond market.
The Ministry of Finance has collaborated with ministries and branches to appraise and issue a certificate of eligibility for credit rating services to a credit rating company.
Currently, the Ministry of Finance is continuing to coordinate with ministries and branches to consider a number of dossiers of application for certificates of eligibility for this service business. At the same time, the Ministry of Finance is also working with reputable credit rating agencies around the world to encourage them to participate in the Vietnamese market.
The Ministry of Finance will also study the model of the secondary market to increase the liquidity of the corporate bond market; study and amend and improve the legal framework to encourage voluntary additional pension funds as well as other types of investment funds (mutual funds, bond investment funds …) to join the first investment in the market through improvements in investment procedures and procedures.