Vietnam’s biggest listed property developer is giving a jolt to a dormant bond market, selling three times as much in bonds last quarter as all the nation’s companies combined in the year-earlier period.
The 3 trillion dong ($134 million) raised by Vingroup Joint Stock Co. compared with less than 1 trillion dong of total issuance in the first three months of 2015, based on Bloomberg calculations of data supplied by state-owned Bank for Investment and Development of Vietnam. The corporate note market accounted for just 0.7 percent of gross domestic product in the last quarter of 2015, lagging the 6.1 percent in the Philippines and 19 percent in Thailand, according to the Asian Development Bank.
“Vietnam needs a lot of long-term investment, such as infrastructure,” said Donghyun Park, principal economist at the ADB in Manila. “It’s absolutely critical for its economic development and that’s where bond markets come in."
Debt sales will given an extra kick to the economy, with Asia Commercial Bank readying a 2 trillion dong sale and industrial park operator Kinh Bac City Development Share Holding Corp. planning to raise as much as 2 trillion dong. GDP will increase more than 6 percent for a second year in 2016, economists estimate, the strongest expansion across Southeast Asia, after disbursed foreign-direct investment swelled to a record $14.5 billion last year.
“With the economy growing, the demand for credit by businesses is strong,” said Alan Pham, chief economist at VinaCapital Group Ltd. in Ho Chi Minh City. “Enterprises see an opportunity to enter the corporate bond market where they can get funds for three to five years instead of bank loans, which tend to be short term.”
The Hanoi-based Vingroup sold dong-denominated five-year notes at a yield of 7.75 percent in February, and 10-year securities at 8.5 percent. That compares with a yield of 11.625 percent when it issued five-year global debt in 2013. The yield on the dollar-denominated bonds has dropped to 6.84 percent, according to data compiled by Bloomberg.
The company’s stock price has surged 38 percent in the past year, while the benchmark Ho Chi Minh Stock Index has gained 2.7 percent.
While the economy is still dominated by state-owned lenders, the rate of expansion is creating a “conducive environment” for more corporate bond sales, said the ADB’s Park.
Nam Long Investment Corp., a real-estate developer, said April 11 that it had issued 500 billion dong of convertible bonds to a unit of Singapore’s Keppel Land Ltd. Rong Viet Securities JSC and VNDirect Securities JSC are also targeting offers, while An Phu Irradiation JSC said in March it’s planning a debt sale.
A corporate debt-trading platform that Hanoi Stock Exchange plans to start early next year should improve liquidity and encourage more companies to tap the debt market, said Dang Tran Hai Dang, the deputy manager of research at VietinBank Securities JSC in Hanoi. The platform is aimed at boosting the size of the market, said Nguyen Thi Hoang Lan, deputy general director of the bourse in Hanoi.