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Wednesday, October 5, 2022

Corporate bond market expected to reach 20% of GDP by 2025

By Van Phong

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HCMC – The Government has set a target to raise the scale of the corporate bond market to 20% of the country’s gross domestic product (GDP) by 2025.

Under the Government’s Resolution 54 on economic restructuring in the 2021-2025 period, the stock market’s capitalization was targeted to be equal to at least 85% of GDP and the total bond-to-GDP ratio a minimum of 47%.

The corporate bond market has developed strongly over the past three years with over VND658 trillion worth of bonds issued last year, surging 42% year-on-year, according to the Vietnam Bond Market Association.

As of the end of 2021, Vietnam’s corporate bond market was valued at nearly VND1,200 trillion, equivalent to 14.75% of the country’s GDP.

However, the market size remains small compared with other regional countries, such as Malaysia, Singapore and Thailand, with a respective corporate bond-to-GDP ratio of 56%, 38% and 25%.

The local competent agencies have repeatedly imposed sanctions over violators of corporate bond regulations, typically the cancellation of nine bond issues worth over VND10 trillion of the Tan Hoang Minh Group. In addition, Prime Minister Pham Minh Chinh’s statement on tightening control over the bond, property and stock markets demonstrates the Government’s determination to reform these markets.

The Government has assigned the Ministry of Finance to coordinate with the relevant ministries, agencies and localities to come up with solutions to diversify financial institutions, venture funds, credit guarantee funds, financial consulting units and accounting and auditing services.

In addition, they should draft policies and regulations encouraging venture investment and develop a financial strategy by 2030 and submit it to the prime minister for issuance this year.

The Government also asked the Ministry of Planning and Investment to work with other relevant ministries, agencies and localities to study and determine the possibility of building a law on venture investment and report the results to the prime minister in 2022-2023.

In Resolution 54, the Government also set a target to maintain the bad debt ratio of all credit institutions at below 3%.

Moreover, a professional debt trading market will be developed with the Vietnam Asset Management Company playing the central role in the market.

The Government also expected all commercial banks to apply the Basel II standards.

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