Expected to be a safe haven with fixed interest rates and better than savings, recent developments have shown that investment in corporate bonds Vietnam is potentially risky for retail investors.
Vietnam’s corporate bond market
In the past 5 years, the corporate bond market in Vientam has grown quite rapidly, from about 4.9% of GDP in 2017 to 16.6% of GDP by the end of 2021. Particularly in the first two months of 2022, the amount of corporate bonds issued to the market reached nearly VND 26 trillion, which doubled that of the same period last year.
The rapidly growing size of the corporate bond market has reflected the increasing capital needs of businesses, in the context that traditional credit activities are closely monitored. Meanwhile, for investors, especially retail investors, corporate bonds are also becoming a new investment tool that brings a better passive income than savings, thanks to higher interest rates as well as a safer level than investing in stocks. In fact, despite being warned about risks, there has been no corporate bond issuance deal in Vietnam so far that has caused retail investors to lose money.
However, recent fluctuations related to corporate bond issuances are showing an increased level of risk. The State Securities Commission (SSC) recently announced the cancellation of 9 bond offerings of 3 companies of Tan Hoang Minh Group.
The total value of the bond offerings isVND 10,030 billion. The State Securities Commission said that businesses under Tan Hoang Minh had disclosed false information and concealed information in private bond issuance.
Immediately after the SSC announced the above information, Tan Hoang Minh said that this was an extremely unfortunate and unexpected incident, and the corporation has come up with solutions to ensure the interests of customers.
This is not the first time the State Securities Commission has requested the cancellation or withdrawal of corporate bond offerings. Previously, at the end of 2021, the Ministry of Finance sanctioned two businesses, VsetGroup and Apec Group, and a securities company for offering corporate bonds through the mass media to investors without registration with the SSC in accordance with the securities law. As a result, VsetGroup had to return hundreds of billions of dong to investors.
According to Decree 156/2020/ND-CP, the State Securities Commission has the right to force the withdrawal of securities that have been offered for sale or issued. The maximum refund period is 60 days from the effective date of the decision to apply this measure.
The consecutive issuance of bonds that are required to be returned or canceled are creating risks for investors, especially individual investors who invest in secondary corporate bonds. With limited access to and evaluation of corporate information, individual investors who buy bonds often only look at interest rates.
One point to note is the role of the issue advisory organizations which are securities companies. In any corporate bond information disclosure, securities companies have a disclaimer statement, emphasizing that they are not responsible for incorrect information or any possible risks facing corporate bond buyers.
In essence, the corporate bond market is gradually becoming a major capital channel of the economy, besides traditional channels such as the stock market or medium and long-term loans from commercial banks.
Recent events are accelerating the maturity and differentiation of the corporate bond market. In particular, when buying corporate bonds, investors will not only care about interest rates but also carefully consider many other factors such as transparency, collateral or market reputation of the issuer.
Corporate bonds of listed companies that are transparent with information, secured assets and reputation in the market like banks, large enterprises still have a place even though their bond interest rates may be lower than those of real estate companies.