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The Vietnam bond market development was boosted when Vietnam entered WTO in 2006. In 2011: Vietnam bond market expanded by 16.5 % the fastest rate in the region and valued at 17 billion with the government bond market far larger than the corporate market at 15 billion vs 2 billion. As of 31 December 2011, the total number of government bonds in Viet Nam was 452, with a total value of VND 285,242 billion which is equivalent to 11.4% of GDP
BOND MARKET IN VIET NAM Foundation and Development The Vietnam bond market development was boosted when Vietnam entered WTO in 2006. In 2011: Vietnam bond market expanded by 16.5 % - the fastest rate in the region and valued at $17 billion - with the government bond market far larger than the corporate market at $15 billion vs $2 billion. As of 31 December 2011, the total number of government bonds in Viet Nam was 452, with a total value of VND 285,242 billion - which is equivalent to 11.4% of GDP Foundation and Development Types of bond 1, Bonds issued by Public Entities + Government bonds : + Government-Guaranteed Bonds: + Municipal bonds 2, Bonds issued by Private Entities + Corporate bonds Government bonds and municipal bonds market 1, Primary Market Regulated by Decree 141/2003/ND -CP, Circular 29/2004/TT - BTC, Decision 46/2006/QD - CP Issued by: - State Treasury - Vietnam Development Bank - T- bills are auctioned via State Bank of Vietnam Issuance modes: majority via auctioning and underwriting decreasing issuances via retailing and agents Terms: Bill: 365 days, Bonds: 2, 3, 5, 7, 10, 15 year with the majority in 5 year term Interest rate: ceiling rate applied Municipal bonds: have been issued by Ho Chi Minh City, Ha Noi and Dong Nai Government bonds and municipal bonds market 2, Secondary market Not yet developed Investors have tendency to “BUY” and “ HOLD ”: - Banks: Largest investors and dominant in 5 - year- bond - Insurance Companies: investors in longer -term bonds Secondary trading are carried out via STCs: listed on HOSTC/ HOSE and HASTC/ HNX Low turnover Lack of financial intermediaries playing roles of market maker Corporate Bond market 1, Primary market Regulated by Decree 52/2006/ND -CP for private issuance, Securities Law and Decree 144/2003/ND - CP for public offering Issued by: - Limited companies - Joint stock companies - State owned companies in transition Issuance mode: - Private placement: through Auction, underwriting, agent - Public offering: none corporate has issued via this approach due to the more thorough and complicated requirements for public offering Corporate Bond market Issuers: - Mainly big SOEs ( i.e: Vinashin, EVN, Lilama, Song Da Corp… ) - Bond issued on the principles of self - responsibility Underwriters: - Banks and other financial institutions: local securities companies - Also foreign bank: HSBC, Deutsche Bank, ANZ… 2, Secondary market Underwriters for corporate bonds are active in selling bonds to wide range of investors, both local and foreign investors. However, bonds trading on secondary market is still limited. Size of Local Currency Bond Market (Local Sources) Institutional Infrastructure Legal and Regulatory Environment Legal - No single comprehensive law for bond market, each aspect of the market is subject to a wide range of Decrees and Regulation Taxation - VAT: exempted - Income tax: Individual: exempted; Institution: 28% Accounting Practices - Vietnamese Accounting Standards (VAS) have been introduced (26 Accounting Standards in five series) - Two international standards have not yet been included in VAS: IAS 32 and IAS 39 - Not clear guidelines in respect of enforcement and monitoring [...]... secondary trading & liquidity 5 Low liquidity especially in the secondary market of corporate bond due to: + Newly established market index + Lack of professional market makers 6 Narrow investor base PROBLEMS OF BOND MARKET IN VIETNAM (3) 7 OTC market for bond issuing & trading not yet established 8 Bond trading in secondary market is limited because: + Bond issuances are not standard in terms of sizes... Corporate bonds are not listed on STCs + Not having a credit rating agency→difficult for companies to mobilize funds internationally and domestically Government implications Established Vietnam Bond Market Association (14/8/2009) Activities: – – – – – – – Building and Institutional Strengthening of the Association Market Development Training Activities Developing Market Infrastructure and Vietnam Bond. .. settlement at Vietnam Securities Depository (VSD) PROBLEMS OF BOND MARKET IN VIETNAM (1) 1 2 3 Small size (15.8% GDP), government bond still dominate the market with 14.3% GDP (2011) Ceiling interest rates are not reflecting the true demand/supply relation of the market Government bond interest rates yet to be benchmark rates PROBLEMS OF BOND MARKET IN VIETNAM (2) 4 Small volume but too many issuances (more... clear issuing schedule for issuances Let VBMA set up a corporate bond information center Apply accounting standard which gradually complied with international standard Government implications In June, 2012, HNX will apply a new system to support the bond market: + Electronic bidding + The yield curve + Bond index Vietnam s way of development Structural improvements: – Additions to existing framework...Institutional Infrastructure Risk Management - Enterprises have only recently been required to prepare audited financial statement - Financial exposure are not being measure or reflected in accounts since IAS 32 and 39 have not been adopted - Risk management practices are steadily improving amongst the domestics banks Clearing & Settlement - Depository, clearing and settlement at Vietnam. .. development Structural improvements: – Additions to existing framework to enhance transparency, predictability, accounting and audit requirements – Market infrastructure reforms in primary and secondary trading, depository, settlement; liquidity – Initiative to set up local rating services Welcome additional technical assistance ... Database Legislative Building and Policy Comments International Cooperation Research Government implications Aims: – – – – Support propaganda and dissemination Act as a forum and Make contribution through the policy comments and support Lead VBMA’s review and comment of draft laws and regulations on the bond Government implications Establish an independent Domestic Credit Rating Agency Circular . BOND MARKET IN VIET NAM Foundation and Development The Vietnam bond market development was boosted when Vietnam entered WTO in 2006. In 2011: Vietnam bond market expanded. OF BOND MARKET IN VIETNAM (3) 7. OTC market for bond issuing & trading not yet established 8. Bond trading in secondary market is limited because: + Bond issuances are not standard in. (2011) 2. Ceiling interest rates are not reflecting the true demand/supply relation of the market 3. Government bond interest rates yet to be benchmark rates PROBLEMS OF BOND MARKET IN VIETNAM (2) 4.