Corporate bond market cools for second month

Compared to August, the figure was down 84%.

Creditors remained the biggest issuers as the value of their sold bonds was VND3.7 trillion, accounting for nearly 39% of the total figure.

Real estate firms ranked second with VND3.07 trillion worth of corporate bonds sold to investors in September, which accounted for 32.3% of the total.

Services and construction companies issued VND226 billion and VND300 billion worth of bonds in September, respectively.

Their figures accounted for 2.4% and 3.2% of the market’s total, respectively.

In October, 20 companies organised 90 bond auctions. The average term of the bonds was 5.47 years.

Bonds sold by lenders had the highest average annual yield rate of 6.08%, followed by construction companies (5.33%), property developers (4.61%), and services suppliers (2.69%).

The northern market regulator said that the market continued cooling down in October since Decree 81/2020/NĐ-CP took effect on September 1 to tighten the corporate bond market in order to protect investors that are vulnerable to risks and make the market more transparent.

According to the HCM City Real Estate Association (HoREA), outstanding loans for real estate companies in HCM City increased by 5.9% in 10 months to VND293.8 trillion in October.

The figure was equal to 12% of the total outstanding loans for all sectors in the southern hub city, which rose 5.5% in 10 months to VND2.42 quadrillion in October.

About 2.7% of outstanding loans for real estate projects were considered bad debts, according to HoREA.

The Vietnamese economy continued progressing in the first nine months at a pace of 2.12%, inflation was controlled well and the consumer price index (CPI) rose only 3.71%.

Those factors mean the bad-debt ratio in the real estate sector remains under control, HoREA said.

“But a large amount of loans made to real estate firms, including bond purchases by both institutional and individual investors, may turn to non-performing loans,” the association warned.

The regulators should pay attention to consumer lending, especially when some people borrow money to buy properties instead of building and repairing their houses as contracted, HoREA said.

Those loans may account for 1.7% of the total real estate loans and such loans require stricter supervision from the authorities, the association added.

Property developers made big bond issuances in January-August but the sector cooled down in September and October due to Decree 81/2020/NĐ-CP.

It should be noted that the number of individual investors accounts for 20% of all investors while bond purchases by banking institutions occupy a majority of the total figure, HoREA said.

Those underline potential risks for investors, issuers and financial companies when the bonds come to maturity, the association said.

There needs to be an independent rating agency to evaluate the bond issuers, thus making the market more transparent and better protecting the investors, HoREA said.