They said they had issued corporate bonds to build enterprises and contribute to the country’s economic development conforming with laws and policies, but, instead, were considered as criminals. The messages from experts, National Assembly deputies, leaders of ministries and branches, and especially Prime Minister Pham Minh Chinh which said that Vietnam doesn’t criminalize civic and economic relations have rescued them from the burden of negative public opinion, and have reassured investors. 

The Prime Minister’s message about the bond market was very strong and clear. 

“We don’t criminalize civil and economic relations,” Chinh said. “The Government clearly shows its stance on strictly and drastically dealing with wrongdoings to make the market transparent and protect investors, businesses and people.” 

Mentioning the handling of some cases recently, including the managers of Tan Hoang Minh, FLC and Tri Viet, he said: “If we don’t take drastic actions, one rotten apple will spoil the barrel. The medium- and long-term capital mobilization, the bond and stock markets, the policy on developing capital market, the confidence of domestic and foreign investors, and the whole economy will be affected.” 

The government’s conference, which was organized immediately after two Prime Minister’s urgent telegrams on stabilizing the capital market, and his message all show strong determination and commitments to regain market confidence.  

Right policy 

Developing the corporate bond market is a policy stated in the documents of Party congresses. The policy allows enterprises to diversify capital mobilization channels and ease burden on the monetary policy and commercial banks as said Governor of the State Bank Nguyen Thi Hong. 

Hong said the Vietnamese bond market is still small compared with other regional countries. Therefore, businesses have to rely on bank loans, even when they need medium- and long-term capital. This creates pressure and risks on the credit institution system which mostly have short term capital (accounting for 82 percent of total capital mobilized).

If the corporate bond market develops in a transparent and effective way, this will help balance and harmonize capital structure.

Businesses would seek short-term capital from banks and will rely on the capital market for medium and long term capital. This reduces the risks and creates favorable conditions for credit institutions to develop effectively, and allows enterprises to take initiative in planning their production and business. 

Minister of Finance Ho Duc Phoc said that a stable capital market will serve as an important medium- and long-term capital mobilization channel for the Government and enterprises. 

Crucial problems 

There are some things that hinder the market confidence. One of them is small individual investors who buy corporate bonds. 

Under the Securities Law, individuals holding listed securities and registering transactions with the value of at least VND2 billion as per the confirmation of securities companies are considered professional securities investors. And only professional securities investors can make investments in bonds. 

The regulation that appears to be strict has turned out to be a loophole for securities companies to exploit. 

“They use my account to buy  shares worth VND2 billion and three days later, they sell the shares to get back the capital. As such, I become a professional investor. Meanwhile, securities companies can both sell bonds and take back capital,” an individual investor said. 

A financial expert said he is sure that most people in countries such as the US, UK and Australia don’t make direct investment in corporate bonds. Bonds in general, including government and corporate bonds, are mostly wholesale investment instruments, which means that only institutional investors trade that kinds of securities. 

The fast-growing corporate bond market continues to generate risks because there are individual investors who do not have sufficient knowledge, while many investors commit fraud to become professional investors to be eligible to invest in bonds. 

What to do?

Discovering the problems and settling them to regain market confidence is a wise move that Vietnam needs to take, rather than strictly tighten the market and let it fall into ruin.

Phoc said in the immediate time, the Ministry of Finance (MOF) would propose that the Government amend the regulations on issuing bonds stipulated in Decree 153. The new regulations will set tight control over securities companies which act as consultants for bond issuance. Weak securities companies won’t be allowed to issue bonds. Bond issuers must inform the State Securities Commissions and Stock Exchanges about the issuance and regularly provide information about how to use the money. 

MOF will also study and recommend to the Government and submit to the National Assembly for an overall review of the provisions of the Securities Law.

It will take time to amend laws and regulations. In the immediate time, it’s necessary to deal with the Tan Hoang Minh case, so that it pays money back to investors. 

It’s also necessary to inspect and supervise enterprises which have issued bonds to warn them against repeating the problems of Tan Hoang Minh. Issuers need to be asked to have mortgaged assets when issuing bonds. It is also necessary to quickly follow procedures, so that the enterprise can sell projects to pay debts.

Tu Giang