Corporate bonds: urgent situation needs drastic action
The government asked the Ministry of Finance (MOF) to report on each type of bond and the maturity of privately issued bonds in Q4 2022 and 2023, and suggest solutions to handle the issue.
MOF has also been asked to deal with difficulties in corporate bonds in the short term and promote the healthy, effective and sustainable development of the bond market in the medium and long term.
The instruction in the document following the Prime Minister’s speech at the National Assembly and the October government meeting showed that the government is paying attention to the handling of corporate bonds.
Meanwhile, the Private Sector Development Research Board (Board IV) several days ago sent a document to the Prime Minister, suggesting that commercial banks buy back corporate bonds that will mature soon as a special type of credit.
I would like to suggest more solutions to the problem.
The thing that needs to be done urgently now is regaining investors’ confidence and avoiding the ‘crowd effect’.
Large enterprises issuing corporate bonds need to have a dialogue with investors and clearly report their financial situation and business plans and commit to pay debts so that investors feel secure and won’t ask to buy back the bonds before maturity.
If issuers have difficulties in debt payment, they may consider paying the debt with goods and products under mutual agreement.
During that process, state management agencies need to supervise large enterprises’ debt payment capability.
It is necessary to allow the Vietnam Asset Management Company (VAMC) to buy bad debts from corporate bonds to create a clear message for the market.
In such conditions, media and press agencies play an important role in solving the problem. Responsible reporting must be done so as to avoid ‘throwing more oil on the fire’.
This not only requires awareness from reporters and editorial boards, but also capability of state management agencies.
As for state agencies, in addition to giving a strong message about control of the situation, they need to take drastic action to calm the public.
The state agency handling of corporate bond capital needs to be as subtle, timely and drastic as the handling of bank loans that happened two decades ago, because it involved hundreds of thousands of investors.
The markets of corporate bonds, credit, real estate and securities are communicating vessels that have a direct impact on each other. Therefore, urgent solutions need to be taken in emergency cases.