Friday , May 24 2024

Enterprises must be rated before issuing bonds: experts

A banker counting VNĐ500,000 banknotes. Photo

HÀ NỘI — The Vietnamese corporate bond market is a young and growing market, but lacks control. Credit rating is one of the key steps to reducing risk and helping the market move towards proper development, according to experts. 

While bond issuances through public placement are more difficult as issuance plans must be approved by the State Securities Commission (SSC), private offerings are much easier as enterprises do not need to ask for permission, they just need to create plans and call for investment. 

Because of this, many companies, mostly realty businesses, choose private placements to distribute bonds to retail investors. 

In 2021, corporate bond issuances were equal to the total offering during the 2011-2018 period, of which 95 per cent were private offerings, while only 5 per cent were through public placements.

However, information about how enterprises spend the mobilised capital remains unclear. There is no inspection or supervision on how the money is spent after the fundraising, causing risks for investors. 

The corporate bond market is a channel that shares the burden with the banking market. Therefore, for the Vietnamese market, it should not be controlled too tightly or too loosely. Instead, it needs a market mechanism for self-regulation, so that investors can assess risks, Lê Anh Tuấn, Investment Director of Dragon Capital, said at a seminar on “Sustainably developing the corporate bond market” launched by the Labourer Newspaper on Tuesday morning.

“I think that the first requirement of corporate bond issuances is credit assessment,” Tuấn said.

“It can even be mandated that all companies issuing bonds are required to evaluate their credit.”

Similarly, Đinh Trọng Thịnh, an economic expert, said that in many countries, the lack of financial statements and asset proofing is normal, but with a young market like Việt Nam, it is not appropriate.

Meanwhile, Cấn Văn Lực, a member of the National Financial and Monetary Advisory Council, said that we need to consider whether enterprises should be encouraged or forced to provide credit ratings before issuing bonds. 

“For example, it can be mandatory at the beginning, and when the market develops well it can be loosened,” said Lực. 

However, there are only 2-3 credit rating companies at the moment. Therefore, the economist suggested allowing more credit rating companies to be opened, shortening rating time.

Banks are big corporate bond consumers

At the seminar, Lê Đạt Chí of the University of Economics Hồ Chí Minh City said that about 60 per cent of corporate bond buyers are banks. 

In fact, the State Bank of Việt Nam (SBV) has issued a document to guide the banking system in holding corporate bonds. Because if banks are investors holding most of the corporate bonds, it will be very risky.

By doing so, banks are likely to help businesses issuing bonds to refinance, switching from secured loans with supervision to loans from corporate bonds which means almost all the money is handed over to businesses, and banks can’t control capital flow after issuance, like what they spend on or how they invest.

Therefore, Chí said that the trading of bonds in the secondary market and potential risks need to be clarified in the amended Decree 153 on corporate bond issuances.

Capital mobilised from the stock market, including shares and bonds, is equivalent to 26 per cent of the total capital supplied to the economy.

Of which, corporate bonds account for about 22.7 per cent of the total amount of capital supplied to the economy each year, while the capital mobilised through share issuances accounts for only 3.5 per cent of the total amount of capital injected into the economy. VnExpress News

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