Forty percent of bonds issued by banks are bought by securities companies, but analysts believe that the real bond holders are commercial banks.
According to SSI, in the first eight months of the year, banks issued VND56 trillion worth of bonds, or half of the total bond value of the market.
The high successful issuance rate of 99.6 percent shows that bank bonds can attract investors. Who bought the bonds?
According to SSI, 40 percent of bank bonds (VND22.9 trillion) were sold to securities companies. However, analysts said they cannot find any reason for securities companies to hold bonds.
Tran Nhat Nam, a respected finance expert, affirmed that securities companies will never hold bank bonds.
“Their capital cost is always higher than the 6-7 percent interest rates of bank bonds. Buying bank bonds must not be a good choice for them,” Nam said.
|According to SSI, 40 percent of bank bonds (VND22.9 trillion) were sold to securities companies. However, analysts said they cannot find any reason for securities companies to hold bonds.|
Moreover, the companies cannot retail the VND23 trillion worth of bonds to individual investors. The interest rates of 6-7 percent per annum are not attractive to individual investors.
SSI estimates that the average interest rate and maturity term of bank bonds in the first eight months of the year were 6.75 percent per annum and 3.3 years, respectively.
“Why do securities companies still buy bank bonds which have low interest rates of 6-7 percent, while they have to mobilize capital at interest rates of 13-14 percent for margin trading?” Nam said.
Nam classifies securities companies into two groups. The first group buys bonds in the primary market and then transfers to commercial banks and other financial institutions. The second group buys bonds issued by enterprises, mostly real estate and infrastructure development companies, and sells to individual investors.
A securities expert said securities companies just buy bank bonds for other banks and financial institutions.
Commercial banks have to observe very strict regulations. If they buy bonds from other institutions, the transactions will be considered a type of securities trading operation, and therefore, will not have to go through complicated procedures.
Therefore, banks decided not to buy bonds directly but through intermediaries, which are securities companies in this case.
After securities companies buy bonds in the primary market, they will re-sell the bonds to banks in the secondary market the next day.
Meanwhile, Phan Dung khanh from Maybank Kim Eng (MBKE), thinks securities companies may pour money into bank bonds to disperse risks.
He said the banking system is considered the backbone of the national economy, and banks in Vietnam have a high safety level (no bank has gone bankrupt).
Commercial banks’ purchase of real estate corporate bonds is considered indirect lending to real estate firms, experts say.
A recent study by SSI Securities Corporation found that banks and securities companies acquired a large volume of bonds in the January-August period of this year.