Experts prompt legal framework improvement for corporate bonds development

Authorities should quickly handle violated enterprises to fortify investors’ confidence. In addition, it is necessary to soon complete the legal corridor for the corporate bond market to develop sustainably, said experts.

They were speaking at the seminar on 'Sustainable development of the corporate bond market' organized by Nguoi Lao Dong (Laborer) Newspaper on April 19.
Corporate bond issuance is an effective capital mobilization channel for businesses. Hence, the corporate bond market should not be frozen with several tightening moves from the management agency just because a few cases like Tan Hoang Minh Company and corporate bond issuers with no credit rating, no payment guarantees, and no collateral assets in the market have become "a rotten apple that spoils the whole barrel", according to the experts.
Specifically, authorities must ensure bond issuance information of enterprises is transparent with complete financial statements and collateral assets. Moreover, it is necessary to step up the credit rating activities of enterprises before issuing bonds to reduce risks for investors, they said.
In the context that bank credit into risky channels, including real estate, BOT, BT, and securities, is controlled, the corporate bond channel has been the salvation of many enterprises in these fields over the past time. In addition, a developed corporate bond market will contribute to diversifying investment channels, helping to limit the goldenization and dollarization of the economy.

Currently, corporate bonds account for about 22.7 percent of the total amount of capital supplied to the economy each year, while the capital mobilized through share issuances accounts for only 3.5 percent of the total amount of capital injected into the economy. The scale of corporate bond issuances in the primary market in 2021 has risen to nearly equal to the value of new medium and long-term loans of the entire banking system.

According to Dr. Can Van Luc, BIDV's chief economist, the banking system provides the economy with VND1.4-VND1.5 quadrillion (US$64.9 billion) every year, but only 45 percent of it is medium and long-term capital. Currently, the demand for medium and long-term capital in the economy is extremely huge. It is estimated that in the 2022-2025 period, the economy needs VND3.15 quadrillion ($136.19 billion) per year to invest in society. While State capital accounts for only 25-26 percent, the rest must be mobilized from the external resources, so the role of the capital market in general and the corporate bond market, in particular, is very important.

Currently, the capitalization of Vietnam's corporate bond market is equivalent to 17.5 percent of GDP, much lower than that of other countries, such as China, Singapore, South Korea, and Thailand. Currently, this market still has a lot of room for growth.

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