Mr. NGUYEN NHU QUYNH, Deputy General Director on executive board of HNX, spoke with Saigon Investment on how he believed that in 2020 the size of the corporate bond market saw a strong growth in both the number of businesses and the value of issued bonds.
JOURNALIST: - Sir, why is there such a strong growth in 2020 while there were only 217 companies offering a total of VND 440,426 bn in 2019, and the total value of successful issuance is VND 296,712 bn?
Mr. NGUYEN NHU QUYNH: - If we compare the size of the corporate bond market with our GDP, we see an impressive growth. Specifically, the size of the corporate bond market at the end of 2019 had reached 10.68% of GDP, equivalent to VND 665,000 bn, and by the end of November 2020 it had reached 14.3% of GDP, equivalent to VND 890,000 bn. The average issuance term in the first 11 months of 2020 was 4.07 years while the average interest rate is 9.4% per year. The fast growing corporate bond market has contributed to meeting the capital needs of enterprises, becoming an effective capital mobilization channel, thereby reducing dependency on banks.
- Sir, in July, the Government issued Decree 81/2020/ND-CP which amended and supplemented a number of clauses in Decree 163/2018/ND-CP regulating the issuance of corporate bonds. How will Decree 81/2020/ND-CP affect the corporate bond market?
- Management agencies and experts have repeatedly warned bond issuers and investors against issuing corporate bonds of many enterprises. Therefore, Decree 81/2020/ND-CP that was issued in July, has basically amended the conditions, and limited the size of individual issuance to suit the capital scale of enterprises. Through monitoring information published on the HNX of individual bond issuers, corporate bond issuance activities have had some strong fluctuations, both in issuance scale, issue period, and issue structure.
Regarding the scale of issuance, due to stricter regulations on conditions, the issue of corporate bonds has decreased sharply. Specifically, right after Decree 81/2020/ND-CP took effect, the value of registration for issuance in September, October, and November decreased by 80% to 90% compared to August. In this, the value of successful issuance in three successive months after August went up to VND 10,529 bn, VND 9,504 bn and VND 10,675 bn.
- Sir, what is your comment on the structure of issuing businesses before and after Decree 81/2020/ND-CP?
- Issuance terms in September and October showed an increase. If in August the issuance averaged 3.97 years, then September and October averaged 4.07 years and 5.47 years. This shows that businesses focused on medium and long term periods compared to short term bonds as before.
Regarding the issuance structure, there has been a change in the share of issuance among enterprise groups. In August, real estate enterprises were the group with the largest proportion of corporate bond issuance, accounting for 30.39% of the total issuance value of the whole market. However, after Decree 81/2020/ND-CP took effect, in September, October, and November the enterprise sector in the credit institution sector was the group with the largest proportion of corporate bond issuance, accounting for 90.2%, 38.99%, and 49.75% of the total issue value of the whole market. Thus, with regulations improving issuance standards and conditions, Decree 81/2020/ND-CP has contributed to reducing risks for issuers as well as investors in buying bonds.
- Sir, what plans does HNX have to develop the corporate bond market?
- HNX will officially operate a special website on corporate bond requirements of Decree 81/2020/ND-CP and guiding circulars. When the special page comes into operation, all information will be disclosed and activities will be done automatically through the special page. Specifically, the corporate bond website will publish the basic contents of all separate corporate bonds of issuing organizations, serving the need of investors with information as well as statistics and reporting on individual issuance of corporate bonds. Basically, the site will aim to develop a transparent individual corporate bond market, assist issuers and depository organizations to fulfil their obligation to disclose information, and at the same time help investors access information conveniently in coming time.
In addition, to meet the secondary transaction needs of private bonds, HNX is currently conducting an initial research to build a transaction system for this product. The organization of secondary market for transactions will enhance publicity and transparency, help the subjects interested in this market have sufficient information from issuance to transaction, and at the same time increase the liquidity of corporate bonds.
- Thank you very much.