City of HCM (VNS/VNA) – While there is an urgent need to tackle the liquidity problem, a fundamental solution is to regain investor confidence and stabilize the corporate bond market, experts say.
The bond market should become a main source of financing for companies in the long term, easing the pressure on banks.
But a series of scandals involving issues from property developers such as Tan Hoang Minh, Van Thinh Phat and VKC Holdings have eroded investor confidence.
Meanwhile, authorities continue to investigate and sanction property and bond fraud.
Nguyen Tu Anh, director of the general economic affairs department under the Economic Commission of the Party Central Committeesaid the market has plenty of room for improvement.
It is a flexible capital channel that allows companies to raise funds without causing dilution in ownership, he pointed out.
Between 2017 and 2021, the bond market grew by 46% annually, indicating the huge demand, he added.
Nguyen The Minh, director of analysis at Yuanta Securities, said there are three main channels for companies to raise capital: bonds, stocks and loans.
“So far this year, it’s all been tied together.”
Le Xuan Nghia, a member of the National Financial and Monetary Policy Advisory Council, said the bond market will continue to face headwinds due to lack of investor confidence.
Le Hoang Chau, president of the Ho Chi Minh City Real Estate Association, said many real estate companies are also struggling with a lack of cash and may have to make painful decisions to survive.
Many real estate developers are reducing their activities, as evidenced by delays in investment and construction, he said.
They have stopped embarking on new projects, issuing bonds and doing IPOs, he added.
A huge amount of corporate bonds maturing and due by 2024 is putting a lot of pressure on issuers, which are mostly real estate companies.
According to a report by credit rating agency FiinGroup, the 20 largest bond issuers face liquidity problems as they cannot reissue but have to redeem maturing bonds.
Businesses will all face severe liquidity pressure over the next 12 months due to weak cash flow in a high interest rate environment, he said.
More than VND 35 trillion of bonds issued by real estate companies, mostly unlisted, will mature in 2022 and more than VND 61 trillion in 2023.
Expert Le Duy Binh said providing sufficient and transparent information is key to restoring investor confidence.
Binh said it was necessary for the government to intervene and resolve the difficulties faced by the corporate bond market, warning that the banking system would otherwise be affected.
Bui Van Huy, branch manager of DSC Securities Corporation in HCM City, said investors should carefully evaluate the type of bonds they hold before making a decision to redeem them prematurely.
The government should allow commercial banks to participate in buying bonds before they mature and treat them as a special form of credit, he said.
He also offered to offer preferential credit to major industries and manufacturing areas to help them weather the current difficulties.
In an urgent meeting with securities firms and bond issuers, Finance Minister Ho Duc Phoc ordered bond issuers to consider selling assets to repay debts to investors.
“Bond issuers must maintain their credibility with investors no matter what.”
Deputy Finance Minister Nguyen Duc Chi warned that bond issuers found guilty of wrongdoing would be severely penalized, stressing that the legitimate interests of investors would be protected under all circumstances.
Speaking at a recent meeting, Prime Minister Pham Minh Chinh underscored the government’s determination to reform the bond, property and securities markets.
He also promised severe penalties for violations and ensured that the rights and interests of people and businesses would be protected.
The Government has already set up three working teams for liquidity and currency, real estate market and corporate bonds to carry out the reforms./.