Vietnam’s bond market posts highest growth in emerging East Asia: ADB

The local currency (LCY) bond market in Vietnam posted the highest growth in the emerging East Asia region, as authorities took fiscal and monetary policy actions to mitigate the economic fallout from the coronavirus pandemic.

Employees at the Hanoi Stock Exchange are at work. The local currency bond market in Vietnam recently posted the highest growth in the emerging East Asia region – PHOTO: VNA

The Asian Development Bank (ADB) said in its latest issue of the Asia Bond Monitor that Vietnam’s outstanding LCY bonds totaled VND1,360.7 trillion at the end of March this year.

The market expanded 9.5% quarter-on-quarter in the first three months of 2020 after recording a decline of 3.8% in the previous quarter.

The ADB noted the rebound was entirely driven by the government segment, as outstanding bonds in the corporate sector remained subdued.

On an annual basis, overall market growth accelerated to 13.2% year-on-year in the first quarter of this year from 4.3% year-on-year in the previous quarter.

Government bonds comprised the bulk of the bond market with a 92.6% share at the end of the quarter versus a 7.4% share for corporate bonds.

The total LCY government bonds outstanding at the end of March amounted to VND1,260.3 trillion on a rebound in growth to 10.5% quarter-on-quarter after a decline in the preceding quarter.

The increase in market size in the first quarter of 2020 was solely driven by the jump in the stock of central bank bills. On the other hand, outstanding treasury bonds and outstanding government-guaranteed and municipal bonds decreased in the three-month period.

Meanwhile, outstanding corporate bonds leveled off at VND100.5 trillion at the end of March, reflecting a decline of 1.7% quarter-on-quarter and 8.5% year-on-year.

The ADB ascribed the decline to the absence of new issuance and the maturity of some outstanding debts during the quarter.

Yield movements

The ADB said Vietnam’s LCY bond yield curve shifted downward for short-term tenors and upward for medium-to-long-term tenors between February 28 and May 15.

Bonds with maturities of three years or less saw yield fall between 10 and 25 basis points. The yield for the one-year bond dropped the most, dipping 25 basis points.

In contrast, yields for seven- to 15-year bonds were up between 13 and 31 basis points, while the yield for the five-year bond only rose 7 basis points.

The opposing movements at the different ends of the yield curve led to a widening of the two-year versus 10-year yield spread from 103 to 131 basis points during the review period.

The yield decline at the shorter end of the curve can be traced back to the interest rate cuts of the State Bank of Vietnam (SBV), according to the ADB.

The Vietnamese central bank cut its key policy rate to 4.5% from 5% on May 13, following a 100-basis point cut on March 17, resulting in a cumulative 150-basis point rate reduction for the year through the middle of May.

The ADB stated that the aggressive stance of the SBV’s interest rate reduction sought to spur the domestic economy against the negative impact of the coronavirus pandemic, which is in line with many central banks’ unprecedented rate cuts around the world.

Amid such an uncertain economic environment, the ADB said investors are resorting to holding safe assets such as government securities in the short run, adopting a wait-and-see approach over developments in the coronavirus crisis.

On the other hand, the increase in yields at the medium-to-longer end of the curve reflects investors seeking higher returns at the same time that the Government needs to secure money to finance its socioeconomic development programs to support the economy.

Some upward bias, especially at the longer end of the curve, can be observed amid rising expectations of expanded and extended fiscal stimulus. The upward pressure therefore reflects investors demanding a higher premium to invest in longer-term bonds. SGT

Gia Phong

 
Will demand for corporate bonds become weaker because of a new law?

Will demand for corporate bonds become weaker because of a new law?

Under the amended Enterprise Law ratified by the National Assembly on June 17, nonprofessional investors are prohibited from trading corporate bonds issued in private offerings from January 1, 2021.

COVID-19-induced uncertainty continues to drag on emerging East Asian bonds

COVID-19-induced uncertainty continues to drag on emerging East Asian bonds

The coronavirus (COVID-19) pandemic continues to drag on local currency bond markets in emerging East Asia, including Viet Nam, as investment sentiment globally and in the region wane and containment measures limit economic activity.  

 
 

Other News

.
Ministry launches PayGov to upgrade national public portal
Ministry launches PayGov to upgrade national public portal
BUSINESSicon  26/07/2020 

The Ministry of Information and Communications (MIC) launched a national payment support gateway (PayGov) yesterday in Ha Noi in the latest move to boost e-government in Vietnam.

Japanese firms choose Viet Nam for production expansion
Japanese firms choose Viet Nam for production expansion
BUSINESSicon  26/07/2020 

Fifteen Japanese firms chose Vietnam as the destination for their production expansion within the Japanese government’s programme to support Japanese firms to diversify their value chains in foreign countries, according to JETRO.

Vietnam Banks Association urges MIC to reduce telecommunication charges
Vietnam Banks Association urges MIC to reduce telecommunication charges
BUSINESSicon  26/07/2020 

The Vietnam Banks Association has just sent a dispatch to propose the Ministry of Information and Communications lower charges for banking services via SMS.

R&D spending key to join global supply chain: executives
R&D spending key to join global supply chain: executives
BUSINESSicon  25/07/2020 

Challenges will overwhelm opportunities for Vietnamese part suppliers if they are unable to find ways to upgrade technology and meet international production standards, business executives said on July 24.

Vietnam likely to export 6.7 million tonnes of rice this year
Vietnam likely to export 6.7 million tonnes of rice this year
BUSINESSicon  25/07/2020 

Vietnam is likely to reach its rice export target of 6.7 million tonnes this year thanks to favourable market conditions and high global demand, according to the Ministry of Agriculture and Rural Development.

Ministries disagree on legalizing condotels as houses
Ministries disagree on legalizing condotels as houses
BUSINESSicon  26/07/2020 

The Ministry of Public Security (MPS) does not want condotels converted into houses and does not want to grant ‘red books’ (land-use right certificates) to all apartments.

Local retailers closing shops because of Covid-19
Local retailers closing shops because of Covid-19
BUSINESSicon  25/07/2020 

Many retailers have had to close shops and give back retail premises to landlords because of poor patronage and a dramatic drop in sales.

Standard Chartered Bank forecasts Vietnam’s 2020 growth at 3 percent
Standard Chartered Bank forecasts Vietnam’s 2020 growth at 3 percent
BUSINESSicon  24/07/2020 

Standard Chartered Bank expects Vietnam’s growth to slow to a multi-year low of 3 percent this year on soft external demand, with external headwinds set to offset domestic outperformance.

HCM City sets growth target of 5 percent for 2020
HCM City sets growth target of 5 percent for 2020
BUSINESSicon  24/07/2020 

The chairman of HCM City People’s Committee has urged agencies to develop solutions to support enterprises and local residents affected by the COVID-19 pandemic as part of its effort to revive business activities

Officials urge hastened issuance of legal documents to implement FTAs
Officials urge hastened issuance of legal documents to implement FTAs
BUSINESSicon  24/07/2020 

Vietnam must hasten the process of issuing legal documents and institutional reform to implement free trade agreements (FTAs) and take advantage of these trade deals to boost exports, officials have said.

Vietnamese firms increase overseas investment
Vietnamese firms increase overseas investment
BUSINESSicon  24/07/2020 

Vietnamese firms have been increasing their overseas investments in recent years in an effort to expand their global reach.

Economic recovery faces uphill battle
Economic recovery faces uphill battle
BUSINESSicon  24/07/2020 

The aftermath of the global health crisis may drive Vietnam to a lower-than-expected economic growth landscape, challenging the government’s efforts to revive the economy and restore production.

Vietnam's oil sector open on back of new eased FOL cap
Vietnam's oil sector open on back of new eased FOL cap
BUSINESSicon  24/07/2020 

Even if the latest proposal for international investors to be able to own up to 35 per cent of Vietnamese oil firms comes true, it may still not be smooth sailing for foreign groups to step up in the market.

Rise in overseas interest sparks takeover concerns
Rise in overseas interest sparks takeover concerns
BUSINESSicon  24/07/2020 

In light of its safe and stable investment environment despite the ongoing pandemic, Vietnam has emerged as a promising destination for cross-border mergers and acquisitions 

VN rubber companies report lower earnings amid falling rubber prices
VN rubber companies report lower earnings amid falling rubber prices
BUSINESSicon  24/07/2020 

Rubber producers reported poor second-quarter business results due to decreasing rubber prices, eyeing industrial zone development.

Will SCIC invest in Vietnam Airlines?
Will SCIC invest in Vietnam Airlines?
BUSINESSicon  24/07/2020 

The attempt by the government to rescue Vietnam Airlines with investment capital of VND12 trillion raises a question about the equality between state-owned and private enterprises.

Small cashew nut processors shut down as raw material becomes too expensive
Small cashew nut processors shut down as raw material becomes too expensive
BUSINESSicon  25/07/2020 

Vietnam’s cashew industry has suffered heavily as raw material prices have increased sharply, while the finished product prices have decreased.

Vietnam plans resumption of international flights
Vietnam plans resumption of international flights
BUSINESSicon  24/07/2020 

The Civil Aviation Authority of Vietnam (CAAV) has submitted to the Ministry of Transport (MOT) a plan to resume international air routes.

Ministry proposes loosening conditions to make credit package more accessible
Ministry proposes loosening conditions to make credit package more accessible
BUSINESSicon  24/07/2020 

The deadline for the disbursement of the government's VND62 trillion support package is nearing, but the number of people who can access the package remains modest.

HCM City proposes PM to bring breakthrough to key projects
HCM City proposes PM to bring breakthrough to key projects
BUSINESSicon  24/07/2020 

Despite outstanding disbursement of public investment among Vietnam's localities, HCM City has encountered many difficulties that need to be resolved to accelerate the disbursement of public investment

 
 
 
Leave your comment on an article

OR QUICK LOGIN