Vietnam plans to open its first corporate bond-trading platform as it readies for an expected rise in issuance of company debt.
The Hanoi Stock Exchange will submit proposals to the finance ministry and the State Securities Commission this month, Nguyen Thi Hoang Lan, deputy general director of the bourse, said in a phone interview Wednesday from Hanoi. The market is expected to start operating early next year if approved, she said.
Vietnamese companies usually sell bonds via private placements now. The corporate bond market accounted for just 2.5 percent of Vietnam’s gross domestic product last year, but with the country’s economy expected to grow at its fastest pace in almost a decade, authorities forecast that figure to rise to 7 percent of GDP by 2020, Lan said. A bond-trading venue will help facilitate that growth, providing demand for the extra supply of company debt.
“The market will be more transparent,” Lan said. “We will help create a more proper market where companies can publish their sale plans and investors can find information easily.”
While corporate demand for funding is very high, said Lan, the existing system is opaque and four-fifths of debt is bank loans, which she said is “risky.” With investors, especially foreign investors, finding it hard to get detailed information on corporate bond sales, a trading platform will help match supply and demand and should make it more feasible for companies to issue debt.
“The securities will be more liquid, making them more attractive to investors,” she said.
Under the exchange’s plans, companies will also be able to deposit their bonds with Vietnam’s securities depository center, said Lan.
Investors will welcome the plan, said Long Ngo, a Ho Chi Minh City-based research manager at Viet Capital Securities JSC.
“The problem with Vietnam is that it’s too bank-lending reliant,” said Long. “To create proper capital markets, you need to increase the size of the corporate bond market and get other forms of capital-funding companies besides just banks.”
Vietnam’s government is targeting economic growth of 6.7 percent in 2016, the fastest pace since 2007, girded by strong exports and rising foreign investment.