Corporate bonds

Corporate Bonds Essential for Output Growth | Business

Corporate bonds are an important capital channel for companies as well as opportunities for investors.

Important chain

In 2021, the corporate bond market was worth a total of VND 722.7 trillion, an increase of 56% from 2020. According to a report by Saigon Securities Company (SSI), the total amount of corporate bonds outstanding at the end of 2021 reached approximately VND 1.4 trillion, an average growth rate of 46% per year over the period 2017 to 2021. As a result, the size of the corporate bond market has increased sharply , rising from 4.9% of GDP in 2017 to 16.6% of GDP in 2021. The size of the stock market and corporate bonds grew rapidly from 68% in 2020 to the equivalent of 88% in 2021 per relative to the total credit balance of the whole economy.

According to statistics from the Ministry of Finance, over the period 2016 to 2020, the corporate bond market has been the fastest growing component of the financial market, becoming an increasingly important capital raising channel for companies. in an environment of weak credit growth. The total volume of corporate bonds issued was around VND 1.2 trillion, an average of around VND 239 trillion per year and around nine times more than in the period 2011 to 2015. The rate of average growth of the corporate bond market is 48% per year, and the size of the corporate bond market at the end of 2020 reached nearly 16% of GDP, more than four times that of 2016.

In the market, real estate companies are the largest group of bond issuers with VND 318.2 trillion, up 66.3% from 2020, and accounted for 44% of total issuance in 2021. On the other hand, banks issued goods worth VND 226.4 trillion, accounting for 31.3% of total issuance and a 73% increase from 2020. This figure is partly driven by the need for capital to cover bond redemption, up to VND 67 trillion. In addition, energy and mining groups, non-banking financial institutions and infrastructure development issued between VND 28 trillion and 30 trillion, about 4% of total issuance. In this, the issue volume of non-bank financial institutions, mainly securities companies and the infrastructure development group, increased significantly compared to 2020, from 152% to 225%.

Therefore, in addition to credit and the stock market, corporate bonds are also an important and effective capital raising channel for listed companies today. According to Ms. Nguyen Thi Thanh Tu, senior analyst at SSI, this growth is in line with the development direction of the capital market of management agencies, reducing the dependence of companies on bank credit.

Bank capital base

According to an economic expert, in an environment where bank credit is controlled through risky channels, corporate bonds are the basis of many infrastructure companies, real estate companies and companies that have difficulty in accessing banking capital. In fact, the state management agency itself and the state securities commission also highly praised the effectiveness of corporate bonds. According to a representative of the State Securities Commission, when reviewing the corporate bond market in 2021, corporate bonds have now become a relatively important channel for raising capital compared to fixed-income loans. bank credit, as well as mobilization channels through the stock market.

According to the State Securities Commission, corporate bonds have helped all types of companies raise capital for production and business, and prompted investors to focus on medium and long-term investments term rather than short-term savings. Corporate bonds also help reduce risk for commercial banks by mobilizing short-term capital for medium and long-term loans and improve publicity and transparency in the process of raising capital in Ho Chi Minh City. City. Especially now that the pandemic is under control, the volume of corporate bond issuance has also increased rapidly, showing that companies are encouraging bond issuance to raise capital to revive production and business.

One of the listed companies that successfully issued bonds in 2021 was the Thanh Thanh Cong-Bien Hoa Joint Stock Company (SBT). Last year, SBT successfully offered VND2.3 trillion of bonds under a cooperation agreement with Techcom Securities (TCBS) to issue a VND700 billion package of bonds to the public. of VND, as well as a set of private bonds of 1,200 billion VND. Added to this is a private bond of 400 billion VND bought by Vietinbank. Both years, 2020 and 2021, are considered successful years of SBT in raising capital, the most impressive of which remains the bond issuance activity contributing nearly 77% of the total capital raised by this company.

The above bond issue transaction has just been honored by The Asset, the leading and prestigious publication on finance in the Asian market, in the category The Best Local Currency Bond 2021, within the framework of The Asset Triple A Award 2021. According to The Asset, SBT’s fully unsecured public credit issuance was successful at a time when the global capital market was heavily impacted by the Covid-19 pandemic. It showed investors’ firm belief in the companies’ exceptional capabilities and prospects.

The NoVa Real Estate Investment Group Joint Stock Company (NVL) is also a company that is rated for the efficient issuance of bonds. NVL has successfully issued $300 million of international convertible bonds to foreign investors, without collateral or guarantee, and will be listed on the Singapore Stock Exchange (SGX). The issuance attracted great interest from many reputable international investors with a registration value several times greater than Novaland’s $300 million issuance plan.

According to information from NVL, the capital raised from this issue will be focused on the development of key projects of the company and the increase of the land fund in order to complete the profit plan in the next three years. Furthermore, the success of this capital operation will contribute to a better structuring of NVL’s debt due to the significant increase in the composition of medium and long-term debt.

Saigon Investment