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Significant efforts made to enhance safety and transparency of corporate bond market

VIETNAM, December 5 - HÀ NỘI Significant efforts have been made to enhance the safety, health, and transparency of the corporate bond market, said Nguyễn Hoàng Dương from the Ministry of Finance.

He made the statement at an online seminar held on Tuesday by the Government News.

According to Dương, Deputy Director General, Banking and Financial Institutions Department, the Government issued Decree 08/2023/NĐ-CP on March 5, 2023, which amended and supplemented regulations on bond offering and trading.

Moreover, it directed the implementation of the individual corporate bond trading system starting from July 19, 2023.

These developments have led to remarkable progress in the corporate bond market, particularly in terms of issuance volume and increased investor participation. These advancements have made practical contributions to the post-pandemic recovery and socio-economic development.

He highlighted that following the financial market incidents in October 2022, both domestic and foreign financial markets, including the corporate bond market, suffered significant setbacks. Investors lost confidence, businesses faced pressure to repurchase issued bonds, and encountered difficulties in raising capital for production and business operations.

In response to this situation, the Government and the Prime Minister issued various instructions to address market-related matters. These instructions encompassed refining the legal framework, maintaining macroeconomic stability, improving the business environment, and implementing supportive fiscal policies.

Notably, Decree 08 played a crucial role by introducing mechanisms for negotiation, extension, postponement, and bond exchange to ensure shared risks and harmonious benefits among parties involved.

As a result of these policies, businesses have resumed bond issuances. While there were minimal issuances in the first quarter of 2023, the volume has steadily increased each month from the second quarter onwards. By the end of November, 77 enterprises had issued bonds with a total value of approximately VNĐ220 trillion (US$9 billion).

Businesses and bondholders have made significant efforts to negotiate payments for due bonds. Around 40 per cent of the late payment bonds of 68 businesses now have negotiation plans, and the success rate of negotiations has increased from 16 per cent in February 2023 to 63 per cent in October 2023. Furthermore, financially capable businesses have proactively repurchased bonds before maturity.

The Ministry of Finance, in coordination with other ministries and agencies, has strengthened inspection and supervision to address market violations and enhance market transparency. They have also conducted awareness campaigns and risk warnings for investors, issuing businesses, and financial intermediaries.

Economic expert Cấn Văn Lực emphasises that several recent policy measures implemented by the National Assembly and the Government have also contributed to resolving market difficulties.

"These measures include macroeconomic management policies to ensure stable growth, consistent control of inflation, exchange rates, and interest rate reductions. Additionally, comprehensive fiscal and monetary policy coordination, along with various solutions targeting real estate, bonds, tourism, healthcare, education, and land, have been employed to address challenges faced by businesses and individuals," he said.

Regarding the corporate bond market, certain policies have been established by the Government to facilitate its recovery. Firstly, Decree 08 removes obstacles and difficulties by allowing the postponement of certain regulations related to professional securities investors and offering favourable conditions for negotiations and extension of bond payments.

Secondly, the implementation of the centralised individual corporate bond system has significantly increased market liquidity. According to statistics from HNX, approximately 760 corporate bond codes from about 200 issuers have been posted on this system, resulting in a 20-30 times increase in market liquidity compared to the previous period. This development is crucial as the individual corporate bond trading floor enhances market openness and transparency.

Thirdly, additional measures have been implemented to foster a healthier corporate bond market. For instance, a licence has been granted to operate an additional credit rating organisation, which contributes to enhancing market credibility and transparency. Additionally, there have been significant efforts to address cases of corporate bond violations, resulting in more stringent enforcement.

"These policies have led to a recovery in the corporate bond market. Currently, approximately VNĐ240 trillion has been issued, with VNĐ220 trillion in private corporate bonds and VNĐ20 trillion in public bonds. This represents only a 10 per cent decrease compared to the same period last year. The number of bond issuances continues to increase each month. Despite existing barriers, it is evident that the market is experiencing positive recovery, with restored confidence. These signs bode well for the market's improved development," said Lực. VNS