Vietnam’s Bond Market Should Have Stronger Presence of Global Rating Companies, Experts Say

Recently, the "Corporate bond market: Trust and Responsibility" was held by BizLIVE. During the conference, the economists and some state officials shared some viewpoints on how to make the Vietnam’s bond market more transparent and liquid but at the same time still be able to meet the world standards.

Chairman and President of Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc said that Vietnam is in the process of economic development after the COVID-19 pandemic. After 8 months there have been more positive results but in the picture with many bright spots there are still many things to worry.

Accordingly, although most of the companies are trying to recover their businesses but the journey is still very tough. Apart from the challenges they have to face up to in post COVID-19 pandemic, they are having difficulty in getting access to the capital though they have strived very hard. If this situation continues, that will be very tough for them to survive under this circumstance.

Nguyen Tu Anh, Director of the General Economic Affairs Department, Communist Party Economic Commission, in the mean time, said that the bond market is the very good channel to pump capital in the economy. Companies can mobilize capital without dilution of ownership. Between 2017 and 2021, the market grew at an annual rate of 46 per cent, indicating a huge demand for the financial instrument.

There have been many ideas raised on how to develop the Vietnam’s bond market. Publicly-offered bonds are regulated by the Law on Securities whereas privately-placed bonds are by Decree 153.

The economists and state officials in the conference said that this Decree needs amendment because only the Ministry of Finance is held responsible for the development of the bond market. However, the economists at the conference said that the responsibily should be share with the State Bank of Vietnam.

There have been custom that the companies cooperating with banks to sell the bonds and the banks themselves may get from 3-4% yeild from acting as middlemen between the companies and the public. Thus it is very logical that the State Bank of Vietnam should be involved into the process of managing the corporate bond market.

Lawyer Nguyen Thanh Ha thought that the Decree 153 should be amended so that it will have the power to protect the investors, regardless of institutional or retail investors, when the companies can not repay the bond debt. Some companies want to sell the assets to get money to pay back to investors but the current process of liquidating assets is too complicated and it makes the repayment almost impossible. Furthermore, there should be requirement for the company to have the collateral for the bonds they issue.

Donald Lambert, Principal Private Sector Development Specialist, Southeast Asia Department ADB, shared the viewpoints that Vietnam’s bond market should be reorganized with more involvement from the world standard credit ratings. He took the example of India, Malaysia, China, Taiwan to show that in those coutries and territories, the mandatory credit ratings is applied strictly. And when the companies want to issue bonds, they must undergo not just one time of credit rating but two times. In the cases when the credit ratings are far different, then the credibility of the company is destroyed.

Also according to Lambert, when there is more presence of global credit rating agencies like Fitch, Moody and S&P, the quality of rating in the Vietnam’s financial market will be enhanced in general, corporate governance in the Vietnam’s community of companies will also be improved. What is more, when Vietnam’s companies are evaluated by global credit rating agencies, it will be much easier for them to call for capital in the international market.