Sunday, November 24, 2024 12:43:26 AM - Markets open
VN-INDEX 1,228.10 -0.23/-0.02%
HNX-INDEX 221.29 -0.47/-0.21%
UPCOM-INDEX 91.70 +0.20/+0.21%
Investors warned of the possibility of corporate bond default
Vietnamnews - 10/7/2022 4:33:22 PM
 (0 ratings. You must sign in to rate.)
As some companies have been late in paying the principal and interest when bonds mature, market participants fear that the phenomenon may result in a corporate bond default in the near future.
 
However, risk is a part of investment activities that investors should tolerate, experts have said. 
 
According to experts, this is a sensitive issue since bonds are a new channel to raise capital for businesses. Meanwhile, for the banking system, the problem of bad debt has existed for several decades, so the market has had time to get used to it.
 
For commercial banks, the ratio of bad debt to total outstanding loans published in the financial statements is usually around 1.5-2 per cent. Therefore, in the bond market, investors also have to accept the reality of bad debt, like bank credit.
 
In the corporate bond market, the current outstanding debt is about VNĐ1.5-1.6 quadrillion (US$62.8-67 billion), so there is no surprise if there is about 1 per cent or even 3 per cent of businesses that are late paying the principal and interest, which is worth about VNĐ30-50 trillion, Nguyễn Quang Thuận, general director of FiinRatings, said at a conference at the end of September.
 
Experts believe that investors and regulators should be calm regarding reports of a number of cases of late payment of principal and interest upon maturity of bonds. 
 
In addition, the market expects the regulator to soon issue detailed regulations on corporate bond defaults.
 
“These regulations not only protect investors but also ensure stable business operations,” Thuận said. 
 
“In many situations, businesses only lose liquidity temporarily and can't pay interest for a few days, but they all become hot headlines, then the market withdraws money, and enterprises are dead. We need to be fair.”
 
According to Thuận, by the end of September, the pressure to mature private bonds had decreased by 50 per cent.
 
The reason is that before Decree 65 was issued, many financial institutions had supported businesses to deal with the problem depending on the situation, thereby extending debt and restructuring. This is reflected in the purchase of many corporate bonds before maturity in recent months.
 
To have an objective view of default and bad debt in the bond market, experts recommend investors look at markets in the region.
 
For example, in China, the size of its bond market is $800 billion with a bad debt of about 1.35 per cent. However, in order to develop the market, it is necessary to accept a certain percentage like that.
 
Đỗ Ngọc Quỳnh, general secretary of the Vietnam Bond Market Association, said that in the financial market, investors need to keep in mind the principle of high risk, high return.
 
Therefore, the higher the bond yield, the greater the probability of default. Investors should evaluate the situation and decide based on their risk tolerance.
 
For the market to develop stably, it is necessary to diversify the investor base, especially professional investment funds, and limit the participation of small retail investors in the market. Because only professional investment funds have the ability to diversify investment assets. — VNS
 
Read original article here
 
Newer News
22/11 Monetary policy forecast unlikely to loosen further
21/11 VAT tax reduction should continue until mid-2025: MoF
20/11 Tax shift: e-commerce platforms could shoulder seller tax responsibilities
19/11 US affirms Vietnam not manipulating currency
18/11 Exchange rate fluctuations bring huge profits to many banks
18/11 Should Vietnam implement VAT on fertilisers?
18/11 Central bank issues new decisions on deposit interest rates
18/11 Vietnam needs to build a strategy for disaster risk financing and insurance
14/11 Bank lending in HCM City to remain on steady growth path: SBV
12/11 SBV to propose establishment of gold exchange at appropriate time
Older News
28/09 Commercial banks raise deposit rates after SBV’s adjustment
28/09 Foreign investment disbursement hits record high in nine months
23/09 Reference exchange rate up 8 VND
17/09 MoF proposes to reduce fees by up to 50 per cent to support transport sector
14/09 Reference exchange rate up 13 VND on Sept 14
14/09 Banks speed up disbursement of VNĐ40 trillion interest subsidy package
13/09 Bonds maturity worry real estate businesses
09/09 Ordinary citizens face higher risk in buying corporate bonds
23/08 Finance ministry sets targets for banking system
19/08 Banks should tighten assessment controls of their corporate bonds investments - experts
 
Newsletter Signup
Top Stories
VCCI recommends mineral mining rights be granted through auction and bidding
Central bank works to raise interbank rates and ease forex market
Inflation a concern following salary increases
National Council for Sustainable Development established
Việt Nam, Cambodia look forward to $20 billion trade
Market Update
Last updated at 3:05:02 PM
VN-INDEX 1,228.10 -0.23/-0.02%
Real-time chart
Top 5 Actives
Top 5 Gainers
Top 5 Losers
My Favorite Quotes
Company Research
Type in the symbol above for thorough background information, key statistics and financial information.
Stock Sectors
We continuously improve our services, here are the latest updates...
Portfolio
Allow you to monitor a customised group of securities. You can set up multiple Portfolios to help you better manage your investments.
Trigger Alerts
Get up-to-date alerts delivered directly to your email address.
Stock Screener
Allow you to filter the market and find exactly what sort of company you are looking for.
Live Terminal
Get instant access to FREE REAL-TIME streaming quotes for hundreds of stocks from HOSE, HNX and UPCOM exchanges.