return icon

Will bond defaults occur in Vietnam?

The case of Tan Hoang Minh has caused many investors to shrink back for fear of the collapse of the corporate bond market.


According to economists, corporate bonds issued by enterprises is a kind of debt. A bond default occurs when bond issuers cannot pay the debts within specified periods when the bonds become mature. This happens in many market economies and it could occur in Vietnam. 

The Vietnamese corporate bond market has witnessed a boom since 2018 with the total value of bonds issued reaching VND1.2 quadrillion in 2018-2021, which accounted for 11.4 percent of total outstanding loans of the economy and 14.5 percent of GDP (gross domestic product) in 2021.

Analysts have warned about risks posed by the huge amount of bonds. Real estate firms, after two years of being affected by the Covid-19 pandemic, are seeing a cash flow depletion. Meanwhile, the liquidity in the real estate market is low. 

Local newspapers have recently repeatedly quoted experts as warning of risks in the hot corporate bond market which may lead to serious consequences.  

“Newspapers use the term ‘the three nos’ to describe the corporate bond market – no credit rating, no payment guarantee and no secured assets. But I am afraid there are fourth and fifth ‘nos’ – no good financial capability and cash flow, and no feasible business plans. The capital raised from bond issuance may also be used for wrong purposes,” said Nguyen Anh Vu from the HCM City Banking University.  

Huynh Anh Tuan, CEO of DongA Bank Securities, said the current bond interest rate is 12 percent per annum on average, and if counting the cost for the distribution and guarantee, the total cost would be 15 percent per annum. If enterprises have good financial capability, they will borrow money from banks at much lower interest rates, rather than issue bonds. 

Meanwhile, investors who lack sufficient knowledge and information, deluded by high interest rates (2-3 times higher than bank deposit interest rates), rush to buy bonds, despite high risks. 

Dinh Trong Thinh, a financial expert, warned that the ‘three no’ bonds account for 30 percent of total bonds issued, which is a serious problem. It is also a worrying problem that commercial banks buy a large proportion of bonds. In some cases, banks help enterprises do rollover, that is switch from lending with secured assets and strict control over capital use to lending with no strict supervision. 


If bonds are issued privately and not put under strict control and appraisal, and if the secured assets are not high and issuers may use capital for the wrong purposes at any time, it’s highly possible that issuers won’t be able to pay the money back to bond holders and a bond default will occur.  

There are two major groups of corporate bond buyers. The first includes commercial banks and securities companies, while the second is private investors (in the name of professional investors) who buy bonds through intermediaries. 

According to Saigon Securities Incorporated (SSI), of 15 large commercial banks which provide 75 percent of total credit of the whole banking sector (not including Agribank), the total balance of bonds invested in economic organizations as of December 31, 2021 had reached VND214 trillion.  

The average ratio of investment in corporate bonds was only at 3.1 percent, unlikely to have too great of an impact on credit quality. However, if default occurs, banks will lose capital, see bad debts increase, and see their prestige damaged.  

However, the problem doesn’t lie in the bonds issued to institutional investors, but to individual investors. Many banks and securities companies come forward and guarantee bond issuance. Individual investors buy bonds because they think the bonds are issued by banks and prestigious businesses. 

Under current regulations, privately issued bonds are only sold to professional investors. However, bond distributors have many methods to turn individual investors into professional ones. Many ‘professional investors’ cannot even read financial reporters and have little knowledge about bond issuers. 

Experts have warned that such hot growth may lead to serious consequences and the risks may start in 2022, when a large amount of bonds reach maturity.

Tran Thuy


Authority maintains tough stance on safety violations on Hanoi’s “railway café street”

The Vietnam Railway Authority has insisted that it will take a hard line on railway traffic safety violations along Hanoi’s popular "railway café street" sketching across the inner districts in its recent report to the Ministry of Transport.

Foreign hi-tech firms expand investment in Vietnamese market

Molex, the world’s leading supplier of connectors and interconnect components, has unveiled its ambitions to expand its existing manufacturing plant in the Vietnamese market by developing its plant in Hanoi.


Hai Phong lures more than 1.24 billion USD in first nine months

Vietnam rakes in US$16.05 billion from tourism in nine months

Vietnam earned some 394.2 trillion VND (16.05 billion USD) from tourism in the first nine months of this year, equivalent to 78% of the figure recorded in 2019 before the COVID-19 pandemic broke out.


Vietnam invests in 10 energy technologies

Vietnamese poetry collection published in Canada

A poetry collection from five female translators based in Hanoi, entitled Ngũ Sắc Ánh Sáng (5 Sights of Light), has been introduced to Canadian readers by Ukiyoto Publishing.

Multi-billion thermal power project needs more capital

The Ministry of Industry and Trade (MOIT) has asked for ministries' opinions on solutions to problems related to the balance sheet of the Vung Ang 1 thermal-power plant.

The best September photos on VietNamNet

Hot air balloons with the Vietnamese national flag of 1,800m2 on the banks of the Saigon River, Typhoon Noru making landfall in Quang Nam Province, the roofs of many houses being blown away...

BSR to expand Dung Quat Oil Refinery

The Ministry of Industry and Trade (MOIT) has asked Binh Son Refining and Petrochemical JSC (BSR) to clarify some issues related to its project on expanding Dung Quat Oil Refinery.

Dutch conductor to lead concert at Opera House

Conductor Leon Bosch from the Netherlands will lead a concert featuring masterpieces by European composers at the HCM City Opera House on Saturday, October 8.

‘578’ to represent Vietnam at Oscars

An action film starring Miss Universe Vietnam 2018, H'hen Niê, 578: Phát Đạn Của Kẻ Điên (578: Magnum), has been selected as Vietnamese representative at the 95th Oscars, 2023.

USD surges to VND24,000, US$1.7 billion withdrawn from circulation

The State Bank of Vietnam (SBV) withdrew nearly VND41 trillion ($1.7 billion) through open market operations as the US dollar rose to over VND24,000 on September 26-30, 2022.

HCM City to build a series of new traffic projects

HCM City is speeding up procedures to start the construction of key traffic works at gateways by the end of the year, according to HCM City's Department of Transport.

Burning garbage in Hanoi threatens residents' health, property

There have been consecutive fires caused by people's poor awareness, who were burning garbage and straw in residential areas, causing fires recently in Hanoi.

New cargo airline still waiting for license

After the Prime Minister agrees on the establishment of IPP Air Cargo, the Ministry of Transport (MOT) will implement procedures to grant a license to the air carrier, according to MOT Deputy Minister Le Dinh Tho.