Thursday , June 20 2024

Property sector rife with bond defaults: ADB


A recent Asian Development Bank (ADB) report has highlighted defaults in Vietnam’s corporate bond markets, especially in the real estate sector.

The country’s real estate equity index has declined by around 50% since January, ADB said in its latest report on East Asian bond markets.

Government bond yields declined for all maturities between March 1 and June 2 as the State Bank of Vietnam (SBV) eased its monetary stance to support economic growth and foster financial stability, especially in the real estate sector, according to the report.

Data provider FiinRatings reported in early April that 43 real estate businesses had recorded late interest and bond debt payments.

The total value of these bonds stood at VND78.9 trillion ($3.36 billion).

In the real estate sector, the bad debt ratio was over 20%, the second highest figure after the energy sector.

The real estate sector had the largest volume of outstanding bonds, accounting for 33.8% of total.

ADB also said that bond yields in East Asian markets declined from March to May amid easing inflationary pressure in the region and an easing of monetary tightening in the U.S.

Financial conditions in the region remained largely stable even as uncertainty about the U.S. Federal Reserve’s monetary stance lingered and risks in the banking sectors of major advanced economies continued to loom.

Equity markets declined and local currencies weakened slightly against the U.S. dollar between March 1 and June 2, while risk premiums narrowed, ADB reported.

“Most of the region’s central banks have slowed their rate hikes, and the banking sector turmoil in the US and Europe has had limited impact on regional financial markets so far,” said ADB Chief Economist Albert Park.

“However, in the U.S., concern over financial stability and inflation is causing uncertainty about the Federal Reserve’s monetary stance. Financial conditions in the region may continue to be affected by this uncertainty.”

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