Developing corporate bond market in vietnam

BANKING ACADEMY FACULTY OF FINANCE BACHELOR THESIS TITLE: DEVELOPING CORPORATION BOND MARKET IN VIETNAM Student: Dinh Thi Anh Minh Class: K20CLCD Grade: 20 Student ID: 20A4011116 Lecturer: Associate Professor To Kim Ngoc Hanoi, May 2021 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014126229201000000 ACKNOWLEDGEMENT Foremost, I would like to express my very great appreciation to all professors of the Faculty of Finance for their passion and dedication in teaching knowledge and supporting students During my four-year in Banking Academy, I have received both professional knowledge and soft skills from their interesting lesson and valuable advice Further, I would also like to extend my thanks to my research supervisor Associate Professor Ph.D To Kim Ngoc for her patient guidance, enthusiastic encouragement in the thesis-writing process Without her useful and constructive recommendations, this thesis would have never been completed i PLEDGE As a student of Baking Academy in Vietnam, I have read, understood and complied with regulations about plagiarism I guarantee that this thesis is the result of my personal research under the guidance of Associate Professor Ph.D To Kim Ngoc In the citation references, I have explicitly indicated that third-party contributions and work are acknowledged ii TABLE OF CONTENTS ACKNOWLEDGEMENT i PLEDGE ii LIST OF FIGURE iv ABBREVIATIONS v ABSTRACT vi INTRODUCTION LITERATURE REVIEW THEORETICAL FRAMEWORK 3.1 Basic concept of corporate bond market 3.2 Develop the corporate bond market in Vietnam 20 3.3 Factors affecting the development of the corporate bond market 22 Situation of development corporate bond market in Vietnam in the period of 2018-2020 .28 4.1 Overview corporate bond market in Vietnam in the period 2018-2020 28 4.2 Legal framework for corporate bond in Vietnam .34 4.3 Current situation of developing corporate bond market in Vietnam 20182020 38 Solutions to develop the market 47 5.1 Market trends in the near future 47 5.2 Development orientation 48 CONCLUSION 53 REFERENCE: 54 iii LIST OF FIGURE & TABLE Name Page Figure 1: Bond market sizes relative to GDP 13 Figure 2: Size of Local Currency Bond Market in Vietnam 14 Figure 3: Volumes of corporate bonds issued and bonds 28 outstanding (2011-2020) Figure 4: Size of local currency corporate bond market 29 compared to other countries in the region in 2020 Figure 5: Corporate bonds issued by tenors in 2019 31 Figure 6: Outstanding balance of total Vietnamese corporate 37 bonds Figure 7: Size of local currency corporate bond market 38 compared to other countries in the region in 2020 Figure 8: Value of corporate bond issued in last years 39 Figure 9: Structure by corporate bond issuance 40 Figure 10: Funding sources of listed companies 41 Figure 11: Owners of corporate bond 42 Figure 12: Tenor of corporate bond (years) 43 Figure 13: Real estate issuers’ Debt and Interest Coverage 45 Table 1: Corporate bond turnover in some countries 44 iv ABBREVIATIONS ABO Asian Bonds Online ADB Asian Development Bank ASEAN Association of Southeast Asian Nations BIDV Bank for Investment and Development of Viet Nam CAR Capital Adequecy Ratio CD Certificate Deposit HNX Hanoi Stock Exchange HOSE Hochiminh Stock Exchange LDR Loan to Deposit OTC Over-the-counter SBV State Bank of Vietnam SOE State-owned enterprise VBMA Vietnam Bond Market Association VMOF Vietnam Ministry of Vietnam VSD Vietnam Securities Depository v ABSTRACT Vietnam's bond market has changed in recent years, especially in the corporate bond sector Moreover, a series of new regulations related to corporate bond issuance effective from Q4/2020 and early 2021 may cause the corporate bond market to "shrink" in the short term However, in the long term, the potential for developing this market is still very large, proportional to the medium and long-term capital needs of the enterprise New regulations on corporate bonds are expected to help the market develop more sustainably Although it has grown strongly in the last years, the corporate bond market is considered quite risky, when there are many "3 no bonds": no credit rating, no collateral, no payment guarantee Real estate and banking are two sectors which account for a large proportion in corporate bond market However, real estate bonds are higher risk than bank bond, developing commercial bank bond market for Vietnam bond market to minimize risks The objectives of the study include providing an overview of the current situation of the corporate bond market in Vietnam, especially commercial banks’ bond From there, the study gives an assessment of the development of the market in the present and the future Finally, the research offered a number of solutions to help the corporate bond market develop more sustainably Key word: corporate bond, commercial bank, volume, development, Vietnam vi INTRODUCTION “The Viet Nam bond market has seen significant changes and steady progress over the past 10 years It exhibits notable maturity among the developing countries of the Mekong River basin” (ADB, 2018) Viet Nam's size local currency bond market reached 26.1% of gross domestic product (GDP) in 2020, reflecting its impressive development In comparison with other Association of Southeast Asian (ASEAN) members, the bond market of Viet Nam as a share of GDP is still far below that of Thailand (88.66%) and still trails that of the Philippines (47.66%); at the same time, it falls behind the relative market size of Indonesia’s bond market at 3.17% of GDP (Appendix 1) In Viet Nam, government bonds dominate the debt market, followed by corporate bonds, government-guaranteed bonds, and then municipal bonds Government bill and bond maturities vary from less than year to 30 years Corporate bonds and convertible bonds have been issued in the market since 2005 and 2006, respectively Vietnam's bond market has strongly developed in recent years, especially in the corporate bond sector The size of the corporate bond primary market has increased nearly times in the period 2015-2020, from USD2.14 billion to USD12.32 billion The size of the corporate bond market has become quite large, equivalent to 15.1% of GDP and 10.3% of the system-wide credit balance at the end of 2020 This shows that the capital mobilization channel through bonds, one of the components of the capital market along with credit channels and stock channels, has played an important role in the opening of capital sources for the development of Vietnamese enterprises Therefore, there is more and more research on the importance and development of the bond market in Vietnam in the period from 2004 to the present, although the market is still not completed, and many reforms will be expected to appear in the future The bond market in Asia in general and in Vietnam in particular is still in the process of being completed and developed, so it is a potential research topic Besides, this market is also getting more and more attention In general, in the world and domestically, the previous research focused on the bond market in general, the development of this market and its future orientation The above-mentioned domestic and foreign research articles are the good setting for building ideas and content for the essay In general, studies show that developing the corporate bond market is essential today Vietnam's corporate bond market thrives, in which: the two largest corporate bond issuance companies in Vietnam are real estate companies and banks However, real estate bonds are higher risk than banks’ bonds, developing commercial corporate bond market for Vietnam bond market which can help to minimize risks for investors and restructure the capital sources of commercial banks Morever, the reason why we should develop corporate bond market in Vietnam, because issuance bond helps banks have a more sustainable capital mobilization structure, the source of loan will not depend too much on deposits like before However, studies on the development of the banking bond market have not been yet studied adequately, due to the overwhelming source of information and this is only a very small segment of the overall bond market The previous researchs had generally shown the development of bond markets in Vietnam and Asia in general or focusing on goverment bond, at different times and geographical spaces Currently, the author has found some research on corporate bonds of Vietnam but not too many, which is why the author decided to the research topic: "Developing corporate bond market in Vietnam" This research set out targets for the development of the corporate bond market Vietnam in both quantity and quality; at the same time, analyzing the current situation and evaluating this market This study uses the information and data from official websites (ABO, VBMA, …) to demonstrate that the corporate bond market in Vietnam can grow further in the future 1.1 The goal of research On the basis of a synthesis and theories about the corporate bond market and the actual situation of operations in Vietnam, the overall objective of the study is to identify the development status of the Vietnamese corporate bond market in the recent years in recent years, thereby offering solutions to help sustainable development The thesis will generalize the general theoretical issues of bonds, corporate bonds, the market, general issues related to the operation of the corporate bond market in Vietnam and evaluate its development The thesis will summarize the operational status of the corporate bond market in Vietnam Identify factors affecting the development of the corporate bond market Through the analysis, comparison and assessment of the corporate bond market in Vietnam compared to other countries, the thesis will assess the overall development that the Vietnamese market is having From the collected information, the thesis will propose scientifically based and practical solutions for the Vietnamese corporate bond market to help it develop stronger and safer in the future Based on the basic objectives set out, the thesis will answer the following research questions: Firstly, Why we should develop corporate bond market in Vietnam? Second, the elements need to be developed And finally, what should we to develop this market? 1.2 Scope of research The topic focuses on analyzing and evaluating the development status of Vietnam's corporate bond market in the period of 2018-2020 This is a period of strong development of Vietnam's corporate bond market, and a number of new decrees have been applied Continue to build a new key strategy from 2021-2025 The data in the article is mainly compiled from the Ministry of Finance, ABO, and bond news sites from 2018-2020 The topic focuses on assessing the development of Vietnam's corporate bond market, thereby finding out the factors that help it develop more sustainably 1.3 Methodology The object of thesis is corporate bond market in Vietnam with methodology as follow From the research objectives and the scope of evaluation of thes dissy review, the research method is selected by the author based on the method of calculation, specifically combined with the method of synthesis, statistics, practical commentary, method of comparison, analysis and comparison, clarifying research issues