return icon Vietnamnet.vn

VN banks told to be careful with corporate bonds

Commercial banks’ purchase of real estate corporate bonds is considered indirect lending to real estate firms, experts say.

Corporate bond rush

Thanh Nien cited a July report from the Vietnam Bond Market Association as showing that 22 out of 23 businesses successfully issued corporate bonds which raised VND6.764 trillion and $300 million (VND6.96 trillion) worth of funds.

 

{keywords}



As such, the total capital mobilized through bond issuance in July alone hit VND13.724 trillion, an increase of VND800 billion compared with June, and the figure has reached VND130 trillion by the end of July.

The common characteristic of the corporate bonds is the surprisingly high interest rate. Phu Chau Investment & Development JSC, for example, issued VND800 billion worth of 3-year bonds with an interest rate of 11.5 percent for the first year.

The interest rates for the following years will be calculated by the average interest rate of three banks plus 4.8 percent.

The bond interest rates of 10-14.5 percent per annum have caught special attention from the public because they are double bank deposit interest rates. However, the real interest rates bond holders can receive won’t be that high after they pay fees to banks.

The HCMC Infrastructure Investment JSC issued VND200 billion worth of bonds with the interest rate of 11 percent for the first year. The interest rates for the next years will be calculated by the TP Bank’s one-year deposit interest rate plus 3.5 percent.


The bond interest rates of 10-14.5 percent per annum have caught special attention from the public because they are double bank deposit interest rates. However, the real interest rates bond holders can receive won’t be that high after they pay fees to banks.

Nga, an officer of a bank which is issuing bonds for AD Company, explained that the company pays an interest rate of 11 percent per annum, but bond holders receive 9-9.5 percent only, which is just a bit higher than the bank deposit interest rates and less attractive than the banks’ certificates of deposit (over 10 percent).

At present, the Vietnamese corporate bond market still hasn't developed well, so businesses have to issue bonds through banks or securities companies. This increases the bond issuance costs.

Risks

According to Huynh Minh Tuan from VnDirect HCMC, the biggest buyers of real estate corporate bonds are commercial banks and securities companies.

The lending to real estate firms was restricted as per the request by the State Bank because of high risks. Therefore, instead of providing credit directly to real estate projects, banks are buying corporate bonds issued by real estate firms. By doing this, bonds still can pump capital to the real estate sector.

The State Bank of Vietnam (SBV) has officially warned commercial banks of the risks when buying corporate bonds issued by real estate firms. The bonds all have very high interest rates, nearly double that of bank deposit interest rates.

Kim Chi 

 

What's behind real estate firms’ race to issue corporate bonds?

What's behind real estate firms’ race to issue corporate bonds?

Real estate firms are rushing to issue corporate bonds, which analysts say shows their thirst for capital. But there are risks.

As corporations issue more bonds, credit rating firms are needed

As corporations issue more bonds, credit rating firms are needed

VND9.103 trillion worth of listed corporate bonds were issued in the first quarter of 2019. Vietnamese enterprises are issuing bonds instead of borrowing money from banks when seeking long-term capital.

MORE NEWS

VIETNAM NEWS HEADLINES MAY 16

European Film Festival in Vietnam to take place in four localities

31ST SEA GAMES: UPDATES MAY 16

Five golds for Vietnam in SEA Games 31’s athletics

Microplastic pollution found in Da Nang air

Microplastic pollution in the air in both inner and suburban areas of the central city of Da Nang has become serious. Microplastics can go directly into the lungs during daily activities.

State Securities Commission prioritises stabilising solutions for stock market

The State Securities Commission (SSC) is closely monitoring the developments of the economic - political situation, assessing the influence on Viet...

Local aviation market sees strong recovery

The aviation market in Vietnam is vibrant and recovering with the number of international visitors increasing five-fold, according to experts.

Vietnamese PM receives leaders of US companies in New York

Prime Minister Pham Minh Chinh received executives of Warburg Pincus and Glenfarne Group in New York on May 15, part of his working visit to the US and the UN.

Digital transformation: action and breakthrough results

During the time supply chains were disrupted because of the Covid-19 pandemic, Vietnam's wood and furniture industry still maintained its market share and even surpassed rivals to become the largest wood exporter to the US.

Keeping CPI below 4 pct this year a challenge for VN: Economist

It will be a challenge to keep Consumer Price Index (CPI) growth under 4 percent this year, according to an economist.

Vietnam currently tops SEA Games 31 medal tally

Vietnam is standing atop the SEA Games 31 medal tally with 68 golds, leaving second-placed Thailand far behind.

Five bodybuilding gold medals for Vietnam at SEA Games 31

Vietnam reaped a total of five gold medals among the 10 bodybuilding categories at the ongoing 31st Southeast Asian Games (SEA Games 31) after competitions of this sport wrapped up on May 15.

Hanoi should learn lessons from the past in urban planning

Hanoi has announced the master plan for the Red River urban area, with a scale of 1/5000.

Mechanical engineering companies fail to conquer US$300 billion home market

The Vietnamese mechanical engineering product market is estimated to have huge value of $300 billion, but local companies have only a small market share.

Tightening control over ETC service providers

The Ministry of Transport has failed to ensure the progress of the application of the nonstop electronic toll collection (ETC) service as required by the Government and is hurriedly boosting attaching ETC tags on vehicles.

New policies needed to control land conflicts

In order to reduce land conflicts, it is necessary to amend legal provisions and the way of implementing policies.

Chinese dealers flock to purchase Vietnamese lychees

More than 100 Chinese dealers have been permitted to enter and purchase lychees in Luc Ngan district of Bac Giang province which is noted for lychee growing in Vietnam.
back_to_top