4 Leading Companies on the Market
From the beginning of 2024 until the Lunar New Year holiday (February 5, 2024), the corporate bond market witnessed four issuance transactions worth a total value of VND 6,450 billion from four companies.
Among them, Ho Chi Minh City Infrastructure Investment Corporation (CII) issued VND 2,800 billion convertible bonds with a term of 10 years and an interest rate of 10% per year for the first four quarters, and subsequently floating with a higher 2.5% premium compared to the reference interest rate. Bondholders also have the right to convert the bonds into stocks at a price of VND 10,000 per share.
Vingroup (VIC) successfully issued VND 2,000 billion public bonds with a term of 3 years and a fixed interest rate of 15% per year for the first year, and subsequently floating with a higher 4.5% premium compared to the reference interest rate.
Transportation Investment and Development Corporation, a non-public company, successfully issued VND 450 billion private bonds with a term of 3 years and an interest rate of 6.5% per year.
Ninh Thuan BOT Company issued VND 1,200 billion private bonds with a term of 9.75 years and an interest rate of 10.5% per year.
Among them, the highlight is CII’s bonds with the characteristic of convertible into stocks, which has attracted the participation of over 4,000 domestic individual investors, accounting for 80.14% of the total offering quantity.
According to FiinGroup, compared to the booming period when the market recorded VND 10,400 billion and VND 19,700 billion in January 2021 and January 2022 respectively, the figure at the beginning of this year is still modest. However, compared to the total issuance value of VND 490 billion in the same period of 2023, it is not low.
Along with that, the total value of private bond transactions last month reached VND 74,500 billion, down 24.5% compared to the average level in December 2023. Bank bonds are the most active group, with both short-term and long-term maturities, even over 7 years.
According to current information, some companies have plans to issue bonds in the near future, such as HB Bank, VietBank, and two real estate companies including Vingroup and Investment and Development Corporation (DIG).
The corporate bond market will be vibrant.
Looking ahead to 2024, FiinGroup believes that the prospects for the corporate bond mobilization channel will be more vibrant than in 2023 due to several reasons:
Firstly, banks are intensifying bond issuance to improve capital capacity. Although the banking group has not announced all plans, most banks will have plans to raise capital through issuing corporate bonds this year, aiming to supplement debt capital to meet the credit growth target in 2024 (expected at 15% for the whole system in 2024) as well as in subsequent years. In addition, complementing bond capital will increase tier-2 capital and contribute to better meeting the capital safety and risk management indicators of the State Bank of Vietnam, for example, the requirement for the ratio of short-term capital use for medium and long-term loans.
Secondly, low interest rate environment and favorable conditions for long-term capital mobilization. In order to attract investors, most bond offerings nowadays have floating interest rate mechanism and are tied to the benchmark interest rate of major banks. The interest rate level is forecasted to remain low as it is now, and international interest rates are expected to decrease in the coming years. This will be a significant catalyst for industries and companies with long-term capital needs to consider issuing bonds, preparing for business expansion, especially in the context of a strong economic recovery in the last months of 2023.
Thirdly, consumer finance companies will enter a new growth phase after a year of decline in 2023, as issues related to the enforcement of debt recovery by many units have been addressed. In addition, the real estate markets may need more time to see a strong recovery, but legal reforms, especially for the mid-range and low-cost segments, will lay the foundation for reducing legal risks in projects, enabling investors to resume credit capital mobilization activities, including the corporate bond channel.
For infrastructure, FiinGroup expects that sustainable infrastructure projects such as waste-to-energy, wastewater treatment, and environmentally significant projects will be the trend in 2024 and the coming years. As for renewable energy, more time will be needed to see the vibrancy of bond issuance activities until specific regulations and guidelines for Power Development Planning VIII are issued.
Fourthly, investors’ confidence has gradually improved, although the events of corporate bond violations are still being resolved and many bond lots have been technically processed according to the spirit of Decree 08 on restructuring individual bonds. However, FiinGroup has noted the certain participation of professional individual investors in some private bond lots issued by leading companies, which have acceptable risks and high transparency in terms of information.
Data from the Ministry of Finance also shows that 7% of the total successful sale of over VND 300 billion in individual bonds in 2023 were purchased by professional individual investors. Although it is a very modest level compared to the over 30% in the 2019-2022 period, it is also a encouraging sign of the restoration of confidence and acceptance of risks when investing in this product according to the new regulations of Decree 65 on individual bonds.