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Wednesday, October 27, 2021

Individual investors wary of corporate bonds

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HCMC – After warnings from the Ministry of Finance over the corporate bond market, individual investors have become more cautious, leading to a 41.1% slump in the total issuance volume in July compared with the previous month.

In July, the corporate bond demand declined sharply, following a strong surge in the market in May and the rising number of individual investors taking part in issuances via a private placement. As a result, the Ministry of Finance repeatedly warned of high risks against inexperienced and small investors.

The warnings have made individual investors cautious before making investments in the market. Besides, due to the second outbreak of the Covid-19 pandemic at the end of July, investors, especially institutional investors, have rushed to hold cash as a safe option rather than risky assets, said Dinh Quang Hinh, head of the macro economy and strategy department of VNDirect Securities Company.

Earlier, the Finance Ministry advised corporate bond investors to access sufficient information and learn about all the possible risks. For instance, investors should ask issuers and agents to provide information about their financial situation, including that related to their bond mobilization such as issuance volume, debt, interest and principal payment.

According to statistics of VNDirect, the total corporate bond issuance hit VND26.9 trillion in July, down 41.1% against the previous month. Of the figure, bond issue via private placement fell 56.4% at over VND19.9 trillion.

Enterprises still had a strong capital mobilization demand via the bond channel, with the private placement issuance value registered at nearly VND75.6 trillion, up 23.7% compared with June.

However, the successful issue ratio was just 26.4%, much lower than June’s figure at 74.9%.
LienVietPostBank reported the biggest issuance volume via private placement with VND3 trillion, followed by HDBank with VND2.4 trillion and a property company with VND2.3 trillion. Institutional investors accounted for 82.6% of the market while the ratio of individual investors was 17.4%

Between January and July, local firms raised VND196.5 trillion via bond issuance, soaring 48.5% over the same period last year, with the value of private placements expanding 37% at VND179.5 trillion.

Aside from recommendations for individual investors, the Finance Ministry advised enterprises to calculate the cash flow so they can build feasible issuance plans and secure debt solvency. The ministry will coordinate with relevant forces to supervise the market and handle violations.

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