return icon

Experts warn of ‘bond bubble’

Businesses are creating virtual assets by issuing corporate bonds, but experts warn that during the Covid-19 pandemic, a ‘bond bubble’ will bring high risks to the economy.

The Hanoi Stock Exchange (HNX) reported that in August 2020 alone, businesses registered to carry out 723 bond issuance campaigns to raise VND127 trillion worth of funds, an increase of 70 percent over the previous month.







Of these, 172 issuance campaigns were implemented by 37 businesses, successfully mobilizing VND38.4 trillion worth of capital.

As such, the bond value successfully issued in August was double that of July.

Real estate firms were still the biggest issuers with 30 percent of total capital mobilized, followed by credit institutions, and service, production and securities companies.

Xich Lo Do Service Co Ltd, which provides hairdressing and shampooing, successfully issued 10-year bonds wroth VND738 billion on August 25. The face value of the bond was VND1 billion.

The bond issuance rush in August was attributed to Decree 81 which sets stricter requirements on issuers, to take effect on September 1. Businesses rushed to issue bonds prior to that day to avoid the stricter regulations.

According to HNX, 174 businesses issued corporate bonds in the first eight months of the year, mobilizing VND237.7 trillion worth of capital, an increase of 50 percent over the same period 2019.

With permissive regulations, businesses have been continuously issuing bonds in large quantities so far this year. As the bond interest rates are by far higher than bank deposit interest rates, bond issuers can easily attractive private investors.

Vietnam, together with China and Malaysia, are the three fastest-growing bond markets in Asia.

Many businesses had high issuance frequency density in the first eight months of the year with the bond value of 10-100 times of their stockholder equities.

A business even conducted two issuance campaigns within one day. The bonds were issued privately, with no collateral.

While many bond issuance campaigns were conducted, information about the production and business performance of the issuers was not transparent enough.

The average bond interest rate was 10-20 percent. The highest interest rate was offered by a business from HCM City, which issued VND163 billion worth of bonds. If investors bought VND5 million worth of bonds, he would enjoy the interest rate of 15 percent per annum. The figures are 15.5 percent for VND10 million and 19.5 percent for VND1 billion.

The Ministry of FInance (MOF) pointed out that many businesses with small scale and low stockholder equity issued bonds in large quantities. Some businesses did not clarify what they would use the capital for and how to arrange money to pay debts.

Xich Lo Do, for example, issued bonds with the value 36.9 times higher than its charter capital, while its stockholder equity is lower than the charter capital. 

Tran Thuy

Businesses race against the clock to issue bonds

Businesses race against the clock to issue bonds

Large corporations are rushing to seek capital through bond issuances before a new regulation, with stricter requirements, takes effect.

Investors still pouring money into corporate bonds, despite warnings

Investors still pouring money into corporate bonds, despite warnings

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


Ministry listens to firms' difficulties, pledges to raise support

The Ministry of Planning and Investment will propose policies to remove obstacles for enterprises and enable them to seize opportunities to accelerate production and business, Minister Nguyen Chi Dung said.

Vietnam's e-government procurement system set to launch in August

The e-GP would allow effective and transparent management of the public procurement process.


Newly-established businesses in H1 exceed 70,000

Australian Foreign Minister enjoys Pho ga in Hanoi

Australian Foreign Minister Penny Wong enjoys Hanoi's specialty of Pho ga or chicken noodles as she arrived in the city on her first visit to Vietnam.

Vietnamese ceramic artist sets two Guinness World Records

Two Vietnamese ceramic works will be recognised as having set Guinness World Records at a ceremony in Hanoi today (June 30).


USAID assists Vietnamese businesses to reduce greenhouse gas emission

Vietnam Airlines plans to restore its entire flight network by the end of 2023

The restoration of international flight routes is an important condition for Vietnam Airlines to reduce losses and become profitable in the near future.

Saigon Zoo elephant dung used to make paper

A Saigon Zoo member of staff and a group of students are transforming elephant dung into paper.

Future of Hanoi’s 120-year-old Long Bien Bridge unclear

Long Bien Bridge, the iconic bridge across Hanoi’s Red River, has degraded, but no major repair plan has been finalized and its future is unclear.

Information & Communications Ministry works to create modern digital infrastructure

The Ministry of Information and Communications will exert efforts to create a modern and safe national digital infrastructure, and a new space for digital economic growth, and developing e-government towards the building of a digital government.

Vietnamese NA Chairman begins official visit to UK

National Assembly (NA) Chairman Vuong Dinh Hue arrived at Heathrow Airport in London on June 28 (local time), beginning his three-day official visit to the UK.

Vietnam to establish industrial environmental index

The Ministry of Planning and Investment (MPI) has called for the implementation of an industrial environmental index in Vietnam, according to Le Thanh Quan, head of MPI's department of economic zone management.

Rising costs cast doubt on wood companies growth prospects

As wood export turnover is rebounding with rising demand in the domestic market, the revenues of wood enterprises are expected to advance.

Vietnam’s GDP expands 7.72% in second quarter of 2022

Vietnam’s Gross Domestic Product (GDP) in the second quarter of this year was estimated to increase 7.72% year-on-year, higher than the growth rates in the same quarters during the 2011-2021 period.

Danish Crown Prince Couple to visit Vietnam in November

Wind energy and energy efficiency will be in focus during the visit, which will take place on November 1-2.