MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING FINANCIAL FACILITIES ESSAY THEORY OF FINANCE AND MONEY Section Class K3D2 Instructors PGS TS Dang Van Dan Tra[.]
MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM HO CHI MINH UNIVERSITY OF BANKING FINANCIAL FACILITIES ESSAY: THEORY OF FINANCE AND MONEY GROUP 5: SITUATION OF BOND ISSUANCE OF VIETNAM ENTERPRISES First and last name Do Thi Kim Ngan Nguyen Ho Yen Ngoc Tran Thi Phuong Thao Nguyen Thi Phuong Uyen Student code 120603210214 120603210227 120603210158 120603210189 Section Class: K3D2 Instructors: PGS.TS Dang Van Dan Training system: International Training Institute CHẤM ĐIỂM Bằng số Bằng chữ TP HỒ CHÍ MINH – NĂM 2022 TABLE OF CONTENTS Actual situation of bond issuance of Vietnamese enterprises 1.1 The situation of issuing bonds of domestic enterprises (domestic bonds) As we all know, the bond market began to form in 2000, but it was not until 2011 that the bond market began to develop in Vietnam Especially from 2017 until now, the market has developed rapidly, becoming a channel to mobilize capital for businesses, serving production and business, and reducing dependence on bank credit channels The corporate bond market has two forms of issuance: private bonds and public bonds In which, focusing on the form of individual bond issuance, accounting for more than 92% of the total issuance From 2019 to the end of the first quarter of 2022, there were 960 businesses issuing corporate bonds individually with 4,312 issuances with a total value of more than 1.4 million billion VND, an average of 304,000 billion VND/year; about times higher in the period 2011-2015; average growth rate of about 48%/year In 2021, the bond market reached a record level with a total issuance volume of VND 639,766 billion, an increase of 38.8% compared to 2020 (mainly individual bonds accounted for nearly 95% of total issuance, increasing 38.8% compared to 2020; bonds offered to the public increased by 11.8% compared to 2020); unsecured individual bonds accounted for 50.3%, unsecured public bonds accounted for 99% of the total issuance volume The size of the bond market by the end of 2021 is equivalent to 18.2% of GDP, an increase of 42.4% compared to the end of 2020, the individual bond market alone is 16.84% of GDP, an increase of 40.5% compared to the end of 2020 In the first quarter of 2022, the volume of individual bonds issued reached VND 104,752 billion, times higher than the same period in 2021 In the field of issuance, the focus was mainly on real estate with 338 enterprises issuing more than 470,000 billion VND (accounting for 33%); In finance and credit, there are 71 enterprises issuing more than VND 444,000 billion (accounting for 31%); trade and service have 87 enterprises issuing more than 125,000 billion dong; securities with 68 companies issued more than 36,000 billion; In construction, there are 79 enterprises issuing more than 64,000 billion VND… From 2021 to 2022, credit institutions remain the largest issuer, accounting for 40.2% of total bond issuance Banks participate in the market with the role of both issuers and investors of corporate bonds (mainly construction and real estate businesses, in which buying corporate bonds from real estate businesses accounts for about 50% of the total circulation) Credit institutions provide credit to customers through investment in corporate bonds at a high rate, accounting for about 90% of the total corporate bond investment balance of the whole system As of December 2021, the total investment balance of corporate bonds of the whole system of credit institutions is VND 220,000 billion, an increase of VND 46,400 billion (up 26.7%) compared to the end of 2019, much higher than the increase credit growth of the whole system is 3.54% Among 300 companies issuing bonds individually in the first months of 2021, 207 companies issued bonds; although there are collateral assets, but mainly projects, assets formed in the future or shares of the bond-issuing enterprise; Many businesses issue bonds with a large volume while their equity is small, business results have suffered losses over the years, but still issue a volume of corporate bonds up to trillions of dong for the purpose of raising capital for use by the "parent" company; issuing corporate bonds but using them for wrong purposes; there has not been a reputable organization to rate the business, the collateral has not been independently appraised, leading to investment risks and risks of legal disputes; High bond interest rates make many businesses face the risk of default and insolvency, especially for real estate businesses (among more than 100 real estate businesses that issued corporate bonds individually in the past year) In 2021, there are 26 enterprises recording losses in the first months of 2021 As of June 30, 2021, the average debt-equity ratio of listed real estate companies is 2.5 times , while this ratio of unlisted real estate enterprises is 8.1 times)… According to statistics, we can easily see that the demand for capital from businesses is very large, so the bond market develops quickly and shows no signs of stopping Such development is also understandable because although Vietnam's corporate bond market has achieved a rapid growth rate of 45% per year for nearly years, the size of the whole market in general, only 20% of GDP, far lower than other countries in the region Recent movements in the corporate bond market show that we need to properly identify the nature and operating rules of the market the market to behave appropriately, thereby, promoting the market to develop quickly and sustainably, what we aim for is sustainable development, the development of the bond market needs to create and bring stability to the market determine the future of the bond market, not just meet and fix the temporary capital demand as in the present The size of Vietnam's bond market, including corporate bonds, is only 20% of GDP This ratio is very small compared to most developed countries in Asean or compared to Korea and China, with the size of the local currency bond market mostly reaching from 50% of GDP (like the Philippines) to nearly 150% of GDP (like the Korea) From the experience of previous countries, the development of the domestic bond market is an indispensable need and requirement for Vietnam to perfect the financial market structure to ensure the creation of all three important capital channels, including: equity (stocks), long-term debt capital (bonds) and bank credit capital (usually short-term working capital) in order to help the financial market best promote its capital conduction function to promote promote economic development effectively Given the speed and requirements of businesses as well as the needs of economic development, it is forecast that the bond market will continue to increase in the future According to the issued statistics, in 2022, the value of the bonds to mature is VND 214,367 billion; And the forecast for 2023 and 2024 has the largest bond maturity at VND 338,897 billion and VND 297,669 billion, respectively The current state of massive domestic bond issuance has hidden potentials and generated a lot of mistakes by businesses behind it, now many businesses take advantage and collude with consulting units , issuing bonds, auditing units, fraudulently issuing bonds, circumventing the provisions of the law to raise capital illegally, using improperly issued issuance purposes, using them to handle financial problems Urgent key and ensure liquidity for the company such as: reversing bank debts, paying due debts, paying commissions to serve capital mobilization, investing in other business activities hidden many mistakes in the issuance of bonds, creating many risks for investors and security, financial and monetary as soon as investors spend money to buy these individual bonds, because the nature of the business has a sign of sign of illiquidity right from the time of bond issuance For example, in the case of Tan Hoang Minh business owner being arrested for fraud related to corporate bonds, Tan Hoang Minh bond investors have not been refunded after more than months In addition, the main structure of investors in the market is still concentrated in securities companies and credit institutions, the number of professional investors accounts for only 6%, potentially creating risks: Banks buy Bonds are intended to reverse debt for the issuing businesses that have outstanding credit balances at banks, giving rise to increasingly serious bad debts, or by investing in bonds to "pump" money for companies bank's backyard company, self-interest, cross-ownership; Bond issuers take advantage of individual investors' ignorance of information to appropriate assets of bondholders 1.2 Actual situation of bond issuance of Vietnamese enterprises in the international market (International bonds) While raising capital through domestic bond channels is being promoted by domestic enterprises, the issuance of international bonds has not been commensurate with the needs and potentials of Vietnamese enterprises According to the Hanoi Stock Exchange (2022), the scale of international bond issuance by enterprises in 2021 is only 1.24 billion USD, equivalent to about 0.45% of GDP This is quite a modest figure compared to the domestic bond market In fact, the benefits from international bond issuance for businesses are undeniable Issuing international bonds not only helps businesses increase their medium and longterm capital sources, reduce dependence on domestic interest rates, but also improve the reputation and brand of enterprises in foreign markets, creating a stepping stone for business development better penetration of foreign markets Through more than 35 years of opening up and international economic integration, Vietnam has gradually approached international capital through the issuance of bonds international capital through the issuance of bonds abroad According to BIS (2022), by the fourth quarter of 2021, the total value of Vietnam's outstanding bonds has exceeded $4.4 billion On average, in the last 10 years, the total value of outstanding bonds has reached more than 3.2 billion USD, the average annual growth rate is about 5% This shows that Vietnam has tried to find and expand capital from abroad to supplement the limited domestic capital The structure of Vietnam's international bond issuers has also changed markedly in recent decades In the period 2012-2017, most of Vietnam's international bonds were issued by the government with the proportion of more than 70% over the years Even in 2017, almost 100% of Vietnam's outstanding international bonds were government bonds However, this trend has reversed from 2018 onwards The government's share of international capital mobilization has gradually decreased over the years, from 75% in 2018 to only 28% in 2021 Meanwhile, financial and non-financial institutions have gradually become the main issuer weakness of Vietnam in the international bond market Even more impressive is the growing opportunities that have been opened up for Vietnamese non-financial institutions as the proportion of these issuers is increasing in the structure of Vietnamese international bond issuers South, from a modest 13%, equivalent to 513 million USD in 2019 has increased to 31%, equivalent to 1,355 million USD in 2021 Meanwhile, the value of outstanding bonds of financial institutions also increased significantly, from USD 234 million in 2017 to USD 1,813 million in 2021 and accounted for 41% of the total value of outstanding international bonds of Vietnam One of the undeniable reasons for the impressive growth of Vietnamese enterprises in raising international capital in recent years is the more open policy and the increasingly improved legal mechanism of Vietnam for the issuance of international corporate bonds On December 26, 2013, the Government issued Decree No 219/2013/ND-CP on management of foreign loans and repayment of enterprises not guaranteed by the Government This is an important legal basis, defining responsibilities and coordination among state agencies such as the State Bank, the Ministry of Finance, the Ministry of Planning and Investment, as well as the rights and responsibilities of enterprises foreign borrowing business Also aiming at simplifying administrative procedures, unifying the process of conducting international bond offerings of enterprises and managing foreign exchange for international bond issuance of enterprises, in February/February In 2022, the State Bank of Vietnam has conducted public comments on the draft Circular to replace Circular No 17/2013/TT-NHNN This draft, if approved, will be an important step forward, creating more favorable conditions for domestic enterprises to mobilize capital in the international bond market A major change of this draft is the cancellation of all regulations on procedures for appraising international bond issuance plans by state-owned commercial banks Besides the positive changes in the domestic regulatory environment, the stability of the exchange rate is also a favorable factor in borrowing abroad When issuing international bonds, debt repayment pressure will increase for issuers if the local currency depreciates in the foreign exchange market However, from 2018 to now, the exchange rate has remained quite stable in the range of 22,800 - 23,500 VND/USD Especially from the first quarter of 2020 until now, the VND/USD exchange rate has tended to decrease This helps reduce the pressure of enterprises to pay debts in foreign currencies and contributes to a relative reduction in the cost of international capital mobilization of enterprises In addition, impressive economic growth, stable domestic prices and political stability are important foundations for Vietnamese businesses to receive great attention from foreign investors In the period 2011 - 2019, Vietnam's economic growth has always maintained at 5.2%/year or more, higher than that of neighboring countries in the ASEAN region Especially in 2020, when the world and regional economies were negatively impacted by the COVID-19 pandemic, Vietnam still achieved a growth rate of 2.9% while most other countries in the world suffer from negative growth It can be seen that, in addition to the capacity and reputation of enterprises themselves, success in finding international capital to finance domestic operations of enterprises depends mainly on two issues: - Firstly, objective conditions from the international bond market such as the legal system in foreign bond markets, the interest of international investors in emerging markets like Vietnam, the attractiveness of international bond interest rates compared to domestic bond issuance rates… - Second, domestic conditions such as the government's macroeconomic policy and foreign debt management policy from time to time, the provisions of the Securities Law and regulations on foreign exchange management for foreign exchange transactions issue international corporate bonds… Considering the domestic conditions alone, the reality of the past time has shown that the reform of administrative procedures along with the increasingly open and transparent legal corridor has had a clear positive impact on the operation of the country international bond issuance activities of Vietnamese enterprises In fact, businesses (including financial institutions and non-financial institutions) are increasingly accounting for a larger proportion of the total value of Vietnam's outstanding international bonds, from 25% to 25% , equivalent to 764 million USD in 2018 to 72%, equivalent to 3,168 million USD in 2021 This is a trend and also a great opportunity for businesses on the way to find funding for business activities, investment, contributing to economic growth Although opportunities are increasingly open for businesses to raise capital by issuing international bonds, in reality, accessing this market is not easy for any business According to the Corporate Bond Information page of the Hanoi Stock Exchange, in 2021, there were only successful international bond issuances by issuers with a total issuance value of 1,240 million USD In which, 87% of the issuance value belongs to big-name real estate companies, including Phu My Hung Development Company Limited, VINPEARL Joint Stock Company, and Local Investment Group Joint Stock Company NOVA and BIM Real Estate Joint Stock Company, the remaining 13.3% belongs to Ho Chi Minh City Development Commercial Joint Stock Bank (HDBank) There is a complete absence of the participation of other manufacturing, trading and service enterprises - which is also an important driving force for economic development Access to international markets depends on the credit risk perceived by investors and is often measured by a country's credit rating An international rating of B- is generally considered the minimum level for an international bond issue In addition to weighing the trade-offs between a bond's return and its credit risk, international investors also monitor market indexes and if a bond qualifies for inclusion in a index, the need to invest in that bond will automatically arise The possibility of Vietnam being upgraded to include in emerging market indexes of international index organizations such as FTSE, MSCI has been mentioned since 2018 but so far there have been no concrete results This is a major barrier in accessing the international bond market of Vietnamese enterprises Review/Comment on Vietnam corporate bond market REFERENCES Đánh giá thực trạng huy động vốn thị trường trái phiếu quốc tế doanh nghiệp Việt Nam (2022, 11 15) Được truy lục từ tapchitaichinh.vn: https://tapchitaichinh.vn/danh-gia-thuc-trang-huy-dong-von-tren-thi-truong-trai-phieuquoc-te-cua-doanh-nghiep-viet-nam.html Đằng sau việc doanh nghiệp ạt phát hành trái phiếu (2021, 16) Được truy lục từ thanhnien.vn: https://thanhnien.vn/dang-sau-viec-doanh-nghiep-o-at-phat-hanh-traiphieu-post1101523.html Quỳnh, Đ N (2022, 11 13) Vấn đề cốt lõi thị trường trái phiếu doanh nghiệp Được truy lục từ vneconomy.vn: https://vneconomy.vn/van-de-cot-loi-tren-thi-truong-traiphieu-doanh-nghiep.htm Trái phiếu doanh nghiệp có nhiều điểm sáng, nhà đầu tư thiệt lớn nhắm mắt bán tháo (2022, 11 25) Được truy lục từ thuenhanuoc.vn: https://thuenhanuoc.vn/tapchi/chuyen-muc/kinh-te-xa-hoi/f6cf284d-2ea4-43dc-820c8ac233ed608a Trái phiếu doanh nghiệp Việt Nam nay: Những bất cập hệ thống pháp luật, công tác quản lý số kiến nghị (2022, 11 24) Được truy lục từ phaply.net.vn: https://phaply.net.vn/trai-phieu-doanh-nghiep-o-viet-nam-hien-nay-nhung-bat-cap-tronghe-thong-phap-luat-cong-tac-quan-ly-va-mot-so-kien-nghi-a255836.html Vì ngân hàng 'thừa tiền' ạt phát hành trái phiếu? (2020, 2) Được truy lục từ tapchitaichinh.vn: https://tapchitaichinh.vn/vi-sao-ngan-hang-thua-tien-nhung-vano-at-phat-hanh-trai-phieu.html Sở Giao dịch Chứng khoán Hà Nội (2022) Thông tin phát hành - CBIS Portal https://cbonds.hnx.vn/to-chuc-phat-hanh/thong-tin-phat-hanh 10 11 12 ...TABLE OF CONTENTS Actual situation of bond issuance of Vietnamese enterprises 1.1 The situation of issuing bonds of domestic enterprises (domestic bonds) As we all know, the bond market... process of conducting international bond offerings of enterprises and managing foreign exchange for international bond issuance of enterprises, in February/February In 2022, the State Bank of Vietnam. .. individual bonds accounted for 50 .3%, unsecured public bonds accounted for 99% of the total issuance volume The size of the bond market by the end of 2021 is equivalent to 18.2% of GDP, an increase of