The corporate bond market is showing signs of recovery after a prolonged period of inactivity with a notable increase in both the number of issuers and value of issuance.

 

Data on the Hà Nội Stock Exchange showed as of March 24, eight companies issued bonds worth more than VNĐ23.8 trillion (over US$1 billion), of which real estate firms dominated the market with total issued value of VNĐ19 trillion, accounting for 80 per cent of total value.

 

This number was a significant increase compared to the value of VNĐ500 billion in February and VNĐ110 billion in January.

 

On March 16, two realty firms – Hưng Yên Urban Investment and Development Co Ltd and Southern Star Urban Development and Trading Investment JSC – issued bond worth VNĐ7.2 trillion and nearly VNĐ4.7 trillion, respectively.

 

In the first half of March, four other real estate enterprises also issued bonds including Dream City Villas Real Estate Trading LLC (VNĐ2.3 trillion), Nam An Investment and Trading JSC (VNĐ4.7 trillion), Thủ Đô Import Export Trading and Investment JSC (VNĐ40 billion) and Hà Thành Trading and Production Investment JSC (VNĐ45 billion).

 

Also in March, two consumer companies had successful bond issuances, of which Luxury Living Furniture Trading Co Ltd mobilised VNĐ4.8 trillion and HDE Distribution JSC issued bonds worth VNĐ40 billion.

 

The average interest rate of corporate bonds was around 12-13 per cent per annum. However, some businesses offered lower interest rate of 6-9 per cent per year for the initial period, followed by a floating rate.

 

Only Hưng Yên Urban offered zero coupon for 12-month bonds (pay no interest but instead trades at a deep discount) with collateral of property rights arising from business cooperation contracts at Đại An urban area project (Vinhomes Ocean Park 3) between Vinhomes JSC (project's investor) and Hưng Yên Urban Co.

 

Market analysts have predicted the corporate bond market will recover in the near future following the implementation of Decree 08 on private corporate bond placements, which came into effect on March 5. This decree will provide a legal framework to address the current bottlenecks in the corporate bond market, potentially increasing the success rate of issuances by deferring certain provisions such as professional investor regulations or extending distribution time.

 

VNDirect Securities Co estimates the maturity value of corporate bonds in 2023 to be around VNĐ252 trillion, representing a 64 per cent year-on-year increase, with strong maturity pressure focusing in the second and third quarters. — VNS