Real estate firms switch to bonds due to less bank loans

Bond issuance is becoming an ideal channel for real estate firms to raise capital as credit policies for property development are gradually being tightened, experts said.

Real estate firms switch to bonds due to less bank loans

Raising capital by issuing bonds is a new option for property enterprises at a moment when they have to look beyond banks for funds, said financial expert Bui Quang Tin at a workshop held by online news portal Bizlive in HCM City early this week.

According to Le Hoang Chau, chairman of the HCM City Real Estate Association, property developers were still mainly raising capital from banking loans and from customers, with payment following construction progress.

However, bond issuance is proving an effective channel and is forecast to become a major tool for raising capital as in 2019, several policies meant to restrict lending to risky sectors like real estate have or will come into force.

The central bank has increased the risk weighting of real estate loans from 200 per cent to 250 per cent in 2019, which is a significant disincentive for banks to provide loans to the property sector since their minimum capital requirement is a ratio of their risk-weighted assets under the Basel norms.

Meanwhile, the SBV’s regulation on reducing the maximum quantity of short-term deposits that can be used for medium- and long-term loans from 45 per cent to 40 per cent will reduce banks’ liquidity.

To that end, realty enterprises need to count on other sources of funds.

However, according to economist Dinh The Hien, to raise capital by issuing bonds, firms need to have a good brand name, reputation and prestige.

Besides, bond issuers are required to meet more criteria than share issuers, including transparency, Hien said.

According to the HCM City Real Estate Association, businesses operating in the fields of property, construction and infrastructure development issued bonds worth more than VND16.2 trillion (US$690 million) during January-May, or 27 per cent of the total value of bonds which have been already put up for sale.

Phat Dat Real Estate Development Corporation (PDR) has recently announced the successful issue of VND150 billion worth of one-year bonds at a per-annum yield rate of 14 per cent. This is the fourth bond issuance so far this year for the firm. Earlier, it put up for sale VND850 billion worth of bonds at interest rates of 14.45 per cent, 12 per cent and 10.5 per cent.

Dat Xanh Group also successfully made a sale of VND234 billion worth of five-year bonds, offering an annual yield rate of 7 per cent.

 

Positive growth

Notable real estate stocks recorded positive growth in the first half of this year and offered promising opportunities for market players, said Lai Duc Duong, head of Department of Real Estate Sector Analysis at Viet Dragon Securities Company.

Real estate giant Vingroup (VIC), the largest listed company in Viet Nam by market capitalisation, has sky-rocketed by 23 per cent since early this year.

Its real estate arm, Vinhomes Joint Stock Company (VHM), the second-largest listed company by market capitalisation after Vingroup, has also soared 17 per cent since early this year.

According to Duong, VIC and VHM have huge land funds, spreading over large cities and provinces throughout the country.

"This year, VHM has set a business target which is pretty high compared to not only its pals in the real estate industry but also to itself. In the first six months of the year, it almost reached 50 per cent of the yearly plan,” Duong said.

“VIC and VHM are temporarily the most outstanding names in the real estate sectors and are highly valued, but this does not mean all investors will choose them,” said Truong Hien Phuong, senior director of KIS Viet Nam Securities Corporation.

“I would prefer looking for opportunities in some other potential names such as Novaland (NVL), Hung Thinh Land JSC (HTN), FLC Faros Construction Joint Stock Company (ROS), Dat Xanh Real Estate Service and Construction Corp (DXG), and Nam Long Investment Corporation (NLG),” Phuong said.

They invest in high-end apartment projects in big cities with prime locations, large scale resort projects in the coastal regions, Phuong said, adding that these stocks also provided promising investment opportunities.

Foreign direct investment (FDI) into the real estate market in the first six months reached more than $225.9 million, accounting for 43 per cent of the total FDI pumped into Viet Nam.

“If we don't enhance the transparency of the real estate market, FDI flow into the sector may stop. Viet Nam has signed a lot of FTAs, which means that we must adjust the law to suit the integration process, ensuring the attraction of capital inflows into real estate, from both foreign investors and home buyers,” financial expert Bui Quang Tin said. — VNS

 
 

Other News

.
Vietnam's energy sector a magnet for foreign investors
Vietnam's energy sector a magnet for foreign investors
BUSINESSicon  11/09/2020 

National electricity demand is expected to increase by 8.5 per cent a year until 2025 and 7 per cent until 2030, making Vietnam an attractive market for foreign energy investors.

Auto industry steers strategy towards wider supply chains
Auto industry steers strategy towards wider supply chains
BUSINESSicon  11/09/2020 

Vietnam’s automobile industry is transforming drastically but it still lacks scenarios to join the global supply chains after the COVID-19 pandemic.

Versatility letting retail grow anew
Versatility letting retail grow anew
BUSINESSicon  10/09/2020 

The local retail sector is set to maintain its encouraging growth towards the end of the year, with new drivers coming online.

Anxious carmakers hoping losses remain in rear mirror
Anxious carmakers hoping losses remain in rear mirror
BUSINESSicon  10/09/2020 

Despite efforts in converting part of their facilities to produce ventilators and face masks for fighting the coronavirus pandemic, global carmakers are still reporting losses 

Vietnam's current account forecast at 3.7% in 2020
Vietnam's current account forecast at 3.7% in 2020
BUSINESSicon  10/09/2020 

Vietnam’s current account surplus could narrow to 3.7 per cent in 2020 from 4.9 per cent last year due to the impacts of the COVID-19 pandemic, according to Fitch Solutions.

Trade plummets at HCM City’s wholesale markets after second COVID-19 outbreak
Trade plummets at HCM City’s wholesale markets after second COVID-19 outbreak
BUSINESSicon  10/09/2020 

Wholesale markets in HCM City are facing a serious crisis due to the second COVID-19 outbreak. 

Fruit exports to China fall, but are offset by more exports to Thailand
Fruit exports to China fall, but are offset by more exports to Thailand
BUSINESSicon  10/09/2020 

China has reduced fruit imports, but Thailand has been buying more from Vietnam.

Probus Opportunities & Digi Ventures invest in Vietmoney
Probus Opportunities & Digi Ventures invest in Vietmoney
BUSINESSicon  10/09/2020 

Vietnamese pawn chain operator Vietmoney has closed its series A funding round with Probus Opportunities (Probus) and Digi Ventures (DV). Probus and DV will hold a combined 30% stake in Vietmoney and both shall join the Board of Directors.

Vietnam’s forex reserve sets new record
Vietnam’s forex reserve sets new record
BUSINESSicon  09/09/2020 

Vietnam’s foreign exchange reserve has hit a new record high of 92 billion USD, a significant expansion from 84 billion USD which Governor of the State Bank of Vietnam Le Minh Hung revealed in April.

Local ETFs draw foreign attention
Local ETFs draw foreign attention
BUSINESSicon  09/09/2020 

The domestic exchange-traded fund VFMVN Diamond (HoSE: FUEVFVNĐ) on Tuesday issued an additional 300,000 certificates to raise the total amount of certificates to 148.3 million.

Vietnam urged to improve infrastructure to attract more FDI
Vietnam urged to improve infrastructure to attract more FDI
BUSINESSicon  09/09/2020 

Vietnam needed to improve its infrastructure in order to attract more FDI, a webinar heard on Monday.

Da Nang calls for $2 billion investment in 2021-25
Da Nang calls for $2 billion investment in 2021-25
BUSINESSicon  09/09/2020 

Da Nang has called for total investment of VND47.5 trillion (US$2 billion) from the State Budget and foreign sources for the development of 38 projects between 2021-25, focusing on transport and traffic.

Vietnam needs US$8-10 billion for electricity investment annually
Vietnam needs US$8-10 billion for electricity investment annually
BUSINESSicon  08/09/2020 

Given the increasing demand for electricity, Vietnam needs US$8-10 billion for electricity investment annually, Minister of Industry and Trade Tran Tuan Anh said at a meeting on Monday, September 7.

Real estate firms offer sky-high profit rates to attract investors
Real estate firms offer sky-high profit rates to attract investors
BUSINESSicon  10/09/2020 

Investors have been invited to contribute capital to real estate projects and enjoy a profit of 36 percent per annum, and have also been persuaded to buy corporate bonds at a high interest rate of 18 percent per annum.

Investors still pouring money into corporate bonds, despite warnings
Investors still pouring money into corporate bonds, despite warnings
BUSINESSicon  09/09/2020 

Investors are still preferring corporate bonds to bank deposits, and are withdrawing money from banks to buy corporate bonds to enjoy higher interest rates.

Thu Duc City set to be new growth pole for HCM City
Thu Duc City set to be new growth pole for HCM City
BUSINESSicon  09/09/2020 

Like Gangnam south of the Han River in Seoul and Pudong east of the Huangpu River in Shanghai, Thu Duc City is expected to become a new growth area for HCM City.

Nam Dinh-based Rang Dong Textile Industrial Park sign land lease contracts with foreign firms
Nam Dinh-based Rang Dong Textile Industrial Park sign land lease contracts with foreign firms
BUSINESSicon  08/09/2020 

The signing ceremony of a land lease contract and land delivery for factory construction between Cat Tuong Real Estate Group, Top Textile Co., Ltd and Jehong Textile Viet Nam Co, Ltd took place on September 4.

VIETNAM'S BUSINESS NEWS HEADLINES SEPTEMBER 10
VIETNAM'S BUSINESS NEWS HEADLINES SEPTEMBER 10
BUSINESSicon  10/09/2020 

 Digital expo offers VN firms opportunity to introduce fruits, vegetables to EU

There are many talented Vietnamese, but they have not become the country's resources
There are many talented Vietnamese, but they have not become the country's resources
FEATUREicon  11/09/2020 

Where are the talents now? Are they abroad? Many talented people only work as experts and researchers, and their capabilities are not maximized, Minister Nguyen Chi Dung has said.

Ministry proposes overhaul of investment framework for power projects
Ministry proposes overhaul of investment framework for power projects
BUSINESSicon  08/09/2020 

The National Assembly's economic committee held a hearing on the development of Vietnam's energy sector until 2030 yesterday.

 
 
 
Leave your comment on an article

OR QUICK LOGIN