Stringent bond market regulations - Require strictly regulatory approvals for corporate bonds- Stringent transparency and disclosures requirements for both public and private-placed issu
FOREIGN TRADE UNIVERSITY MACROECONOMICS report Topic: Discussion about the Vietnamese corporate bond market INSTRUCTOR: A PROF DR HOANG XUAN BINH CREDIT: KTE203E.1 | K61 GROUP: 05 GROUP MEMBERS PHAM MAI LINH VŨ THANH TÂM TRẦN MỸ HOA PHẠM AN KHUÊ NGUYỄN VŨ VIỆT TRẦN KHÁNH LINH HOÀNG HẠNH AN LÊ NGỌC MAI TRẦN MINH HOÀNG 2212380027 2212380043 2212380016 2212380021 2213380049 2212380029 2214380202 2213380032 2212380018 HANOI, DECEMBER 2022 TABLE OF CONTENTS INTRODUCTION CHAPTER 1: ATTRIBUTES OF A THRIVING CORPORATE BOND MARKET Corporate bond market liquidity The ratio of the size of the local corporate bond market to GDP 3 Stringent bond market regulations CHAPTER 2: ANALYZING VIETNAMESE BOND MARKET Overview of the Vietnamese bond market Analyzing existing regulatory framework loopholes in Vietnam’s corporate bond market Credit ratings and rating agencies in the Vietnamese market 3.1 Credit rating of bonds in Vietnam 3.2 Reasons why bonds needed credit rating CHAPTER 3: CASE STUDIES OF SUCCESSFUL BOND MARKETS 11 Malaysia 11 1.1 History of the Malaysia bond market 11 1.2 Factors leading to Malaysia bond market success 11 1.3 Lessons learned 13 South Korea 14 2.1 Background history: The turning point of the bond market 14 2.2 Major policies 16 Singapore 17 3.1 Structure and historical background of corporate bond market in Singapore 17 3.2 Market situation 18 3.3 Major policies 18 CONCLUSION 20 REFERENCES 21 INTRODUCTION The financial market is made up of three main capital mobilization channels: the stock market, the money market, and the bond market Because of the rapid development of Viet Nam‘s economy, the commercial banking system is overwhelmed in providing long-term loans To reduce the dependence on commercial banks, developing an emerging bond market and in particular, a corporate bond market is crucial However, the question is how to regulate the corporate bond market for healthier development Objective of the research A sound legal and regulatory framework governing corporate bond markets is an important pillar which supports the development of a deeper, broader and more efficient bond market in EMs (IOSCO, 2011) This paper will act as a reference for Vietnam policy makers on legal and regulatory framework to develop their corporate bond market Scope of the research First, we discuss the attributes of a thriving corporate bond market Second, we show an overview of the Vietnamese corporate bond market, as well as how some companies utilized the regulatory framework loopholes,leading to an ever-rising default incidents in the last years We also analyze credit ratings and rating agencies in the Vietnamese market Finally, we will compile the lessons learned from successful bond markets (Malaysia, Korea, Singapore) and apply those lessons to give policy implications to the Vietnam bond market CHAPTER 1: ATTRIBUTES OF A THRIVING CORPORATE BOND MARKET Corporate bond market liquidity A ‘thin’ or illiquid market can also become volatile With fewer orders to absorb market fluctuations, buyers and sellers find it easier to push prices up and down (Bennett, How are market liquidity and volatility related? 2019) The ratio of the size of the local corporate bond market to GDP The level of economic development, proxied by per capita GDP, is a determinant of bond markets development as more developed economies require larger financing for larger fixed capital, education, technology and inter-generational investments (Eichengreen et al., 2004) Stringent bond market regulations - Require strictly regulatory approvals for corporate bonds - Stringent transparency and disclosures requirements for both public and private-placed issues - Continuous monitoring and updating of credit ratings of bonds by the rating agencies To develop the corporate bond market, credit rating activities play an important role Credit rating agencies contribute to increasing operational efficiency in terms of investment supply and demand in the market, helping investors to better perceive the financial capacity and debt solvency of the enterprise, as well as related risks to have investment orientation For investors, the credit rating given by a reputable organization will give investors more information to assess risks, thereby making reasonable investment decisions For bond issuers, bonds with a high credit rating also increase the credibility of the business in the eyes of investors, making it easier for the business to raise capital - Well-established regulatory framework on taxation - Incorporating hedging instruments CHAPTER 2: ANALYZING VIETNAMESE BOND MARKET Overview of the Vietnamese bond market Overall, the corporate bond market of Vietnam has been blooming especially the past years with a robust growth in the corporate bond issuance Issued corporate bond in 2021 reached 658,009 billion VND, a 42% increase compared to 2020’s 462,575 billion VND In which, the public offering rate was 4.58%, much lower than in 2020 (7.10%) Regarding the bond issuing market structure divided by type of enterprise, in 2020, the total issuing value of real estate firms rose to the top, reaching VND 3,689 billion, accounting for 32% of the total value of bond issued In 2021, real estate bonds accounted for 35% of total issuance volume, continuing to increase strongly in total size during the year as the real estate market continued to grow over the year However, the Vietnamese bond market showed a steep decrease as of quarter of 2022 Total corporate bonds were 61,374 billion VND, which went down by 68% compared to quarter of 2021 (VBMA, 2022) In which, construction and real estate were the two sectors with the highest fall in issuing value, a decrease of 98.7% and 93.4% respectively (VBMA, 2022) (source: VBMA, 2022) This is due to the liquidity of these bonds being low due to COVID-19 causing slow project implementation Slow project implementation due to COVID-19 social distancing and project legal procedures is shown by a sharp decrease in the Contracted Sales/Inventory index Sale rate dropped sharply at 30% - compared to the highest record in the market recovery and stabilization phase (only in Hanoi and HCMC - which accounted for about 60% of the national scale) Real estate credit was in difficulty because of the bank credit with the State Bank’s Circular 16 and recent developments in the corporate bond channel (Draft Decree Amending Decree No 153); policy changes after the Thu Thiem land auction Document continues below Discover more from: Macroeconomics Trường Đại học Ngoại… 570 documents Go to course Đề thi cuối kì KTVM Macroeconomics 100% (30) Bai kinh t vi mo - 25 tập kinh tế vi mô Macroeconomics 97% (32) Đề Kinh tế vĩ mô - ngày thi 21/11/2021 Macroeconomics 61 100% (9) Macroeconomics Note Lecture notes Macroeconomics 100% (7) Ly thuyet macroeconomics 36 Macroeconomics 100% (7) 900 câu trắc nghiệm vĩ mô1 184 Macroeconomics 100% (6) Regarding the Vietnamese corporate bond market size, it was much lower than that of other regional countries, evidently in 2020 For example, Malaysia’s corporate bond market accounted for 56% of its GDP, Singapore’s accounted for 38%, and Thailand accounted for 25% While Vietnam only accounted for roughly 14.75% of its GDP Analyzing existing regulatory framework loopholes in Vietnam’s corporate bond market (Publicly-offered bonds are regulated by the Law on Securities whereas privately-placed bonds are by Decree 153) First, the requirements and processes for approval of the corporate bonds are currently governed by very loose legal restrictions As a result, many enterprises lacking financing take advantage of this by offering high interest rates without having a sound business plan Under current regulations, enterprises may mobilize funds through private placements of bonds without having to seek permission from state authorities and are just required to take responsibility for repaying their debts According to the MOF, there are still small-sized enterprises that mobilize large amounts of capital at high interest rates without collateral or with poor-quality collateral The value of unsecured bonds issued in 2021 alone mounted to VND 83 trillion, accounting for 18 percent of the total bond value There are risks in case these enterprises issue bonds, because if their production and business activities struggle, they cannot repay the principal and interest to investors (Fixing legal loopholes to develop a sound corporate bond market ) In the case of Tan Hoang Minh, small investors still consider themselves to be holding bonds issued by Tan Hoang Minh without meeting the conditions to be recognised as professional securities investors as stated in Article 11 of the 2019 Securities Law The reason for this is that Tan Hoang Minh’s subsidiaries issue bonds for the purpose of using them to crossinvest in other member companies in the Tan Hoang Minh ecosystem, instead of raising capital for the company directly offering bonds However, the main buyer of the bond, which is the bondholder, is Tan Hoang Minh Group From that, following the form of a ghost contract called “Investment cooperation with Tan Hoang Minh Hotel Trading Service Co., Ltd.”, Tan Hoang Minh has raised nearly VND 10 trillion from private investors In fact, individual investors are essentially not holders of Tan Hoang Minh bonds, through many of them think they are bondholders, and many others mistakenly believe that the bonds of Tan Hoang Minh Corporation have been licensed by the State Securities Commission of Vietnam However, according to the current securities law, the State Securities Commission of Vietnam only licenses and strictly manages corporate bonds issued by public companies As for private corporate bonds, businesses follow the principles of self-borrowing loans, self-paying debts and taking self-responsibility for capital use efficiency and debt payment ability, without having to obtain approval from any authority Moreover, investors will have to give self-assessments, be responsible for their own investment decisions and bear all risks arising in investing and trading in bonds of these corporations The State does not guarantee that bond issuers pay in full and on time the bond principal and interest upon maturity as well as other rights for bond buyers Therefore, in case a bond issuer loses money and cannot afford to pay, investors will face the risk of not getting paid for the bonds, because private corporate bonds issued in Vietnam mainly come from the companies not rated yet, and many types of bonds are not accompanied by payment security Second, lack of transparency and disclosure in the banking systems There are no regulations on monitoring and managing the use of the mobilized cash flow of investors to ensure that the bond mobilization source is used for the right purpose of development, action and law, which include plans to issue bonds to buy and sell shares in internal enterprises to increase capital "virtual control" or misuse In Vietnam today, in the law on bond issuance, there are regulations that the businesses issuing bonds must disclose basic information about businesses and bonds to investors, to the State Securities Commission, Ministry of Finance However, the information was not made public Finding or accessing information about corporate bond issuance and trading, especially private placement, is very difficult This is due to the fact that the bond issuance plan is subject to approval by leaders of the enterprise itself, such as the General Meeting of Shareholders, for joint-stock companies, or the chairperson of the Board of Directors, for limited liability companies Furthermore, the supervision of the mobilization and use of capital through bond issuance and payment of bond principal and interest is the responsibility of the Board of Directors, the General Meeting of Shareholders, the Members’ Council, the Company President, or the company owner in accordance with the Decree 153 and the company charter Because of the lack of management and supervision by competent state agencies, businesses can arbitrarily mobilize and use capital for improper purposes, thus causing serious damage to investors Third, the legal system lacks a credit rating In Vietnam, there is currently no bond rating activity, leading to a lack of basis for assessing the credit or risk level of the issuer or each issue As bond purchase via private placements is a high-risk investment, it is only suitable to professional investors who are able to analyze and assess risks and have sufficient financial ability However, according to the MOF, current regulations on professional investors are loose, enabling bond salesmen to turn amateur investors into professionals, so that they may offer bonds to every investor, regardless of who they are Fourth, there are no bankruptcy and restructuring regulations One of the risks that exist for bond investors is the risk of default Vietnamese bond investors need the protection provided via bankruptcy laws and by way of property rights legislation or bond covenants Credit ratings and rating agencies in the Vietnamese market In Vietnam, bonds issued to the public are not subject to compulsory credit rating Therefore, when purchasing bonds from companies that have not had their claims of high interest rates verified, investors must assume the risk on their own behalf As a result, there have been innumerable instances where investors have been left with nothing because the companies that sold the bonds fail, are unable to pay their debts, etc To expand Vietnam's bond market and enable it to compete on an equal footing with other international powers, this condition must be addressed 3.1 Credit rating of bonds in Vietnam The credit rating of bonds is the most crucial tool for increasing market transparency and acting as a foundation for investors to choose investment channels 3.1.1 Definition Credit rating is understood as an assessment of “credit quality”, i.e the ability of a business to repay its debts There are two types of credit ratings: credit ratings of businesses (or issuers) and credit ratings of debt instruments such as bonds or some specific loans Thus, it can be understood that bond credit rating is a form of debt instrument credit rating, which is an assessment of the creditworthiness of the issuer’s solvency for bonds (Regulations on the credit rating of bonds in Vietnam - Asl Law 2022) 3.1.2 Criterias to define The ranking of credit rating is made based on the analysis of factors related to financial indicators, business activities, loan and repayment history, etc Bond credit ratings typically include an assessment of the bond’s terms, collateral, and other factors that may affect solvency (such as a third-party guarantee) in the event of a business’s insolvent feature (Regulations on the credit rating of bonds in Vietnam - Asl Law 2022) 3.1.3 Agencies perform Credit rating is performed by credit rating agencies, which are specialized companies providing services to assess the financial strength of businesses, especially in regard to their ability to meet principal and interest payments (Regulations on the credit rating of bonds in Vietnam - Asl Law 2022) CHAPTER 3: CASE STUDIES OF SUCCESSFUL BOND MARKETS Malaysia 1.1 History of the Malaysia bond market Malaysia’s financial industry has supported the country’s economic expansion, which has been further bolstered by significant contributions from the domestic capital market Until the late 1980s, banks had served as the principal source of financing, providing short-term, floatingrate financing to retailers, particularly for working capital needs The Malaysian capital market only began to offer complementary longer-term, fixed-rate financing through the issuance of debt securities in the 1990s By 1992, capital market issuance (RM12.5 billion) exceeded bank financing (RM13.8 billion of net new lending) While equity markets provided the means for the private sector’s growth initially, a substantial amount of capital market financing took the form of bonds over time As of the end of 2019, the capitalization of the stock market stood at RM1.7 trillion (113 percent of GDP) with 929 listed companies, while the total value of outstanding bonds came up to RM1.5 trillion (98 percent of GDP; see figure 1) Net local currency (LCY) bond issuance swelled from just RM2.1 billion as at the end of 1990 (equivalent to 20 percent of the corporate sector’s capital market financing needs) to RM88.9 billion as at the end of 2019 Malaysia has a sizable bond market It has Asia’s second-highest ratio of outstanding bonds relative to GDP as at the end of September 2019 (Japan is first with 242 percent of GDP due to its vast public debt) In absolute terms, the Malaysian bond market ranked fifth in Asia after China, Japan, the Republic of Korea, and Thailand Valued at US$356.5 billion, the Malaysian bond market represents a healthy mix between government securities (51.5 percent of GDP) and corporate bonds (49.5 percent of GDP) (2019) 1.2 Factors leading to Malaysia bond market success 1.2.1 In the nascent stage i) Policy and regulatory framework To enforce every decision made by the government, the Securities Commission Malaysia (SC) was established in 1993 to efficiently drive and regulate the market It has since maintained its mission "to promote and maintain fair, efficient, secure and transparent securities and derivatives markets; and facilitate the orderly development of an innovative and competitive capital market" The government first took a more conservative approach to approvals, such as by doing the reporting and approval on a merit basis, and made efforts to maintain oversight of intermediaries, particularly if they play a major role in market development like domestic Credit Rating Agencies (CRAs) The bond issuance regime should evaluate the investor market structure Listing instruments to achieve liquidity and access to markets as retail-based markets require is less important The bond framework should be flexible enough to allow project bond issuance to leverage the same framework ii) Supporting the demand side 11 The government includes policies to help transition people into the formal sector where higher wages are available, uses defined-contribution schemes and other such mechanisms to stimulate and promote long-term savings, preserve capital by carefully thinking through policies governing early withdrawals Large institutional savings providers are governed with a unified framework The capacity of local pension funds, insurers, and mutual funds to diversify investors investment, as well as consider all pools of capital such as the shariah-compliant instruments used for long-term savings (which were sizable in Malaysia), and grow other forms of investment products like unit trusts and mutual funds Encourage investors to use credit ratings to assist investors with a relative risk ranking of issuers and allow them to price risk iii) Supporting the supply side The government debt market and the private corporate bond market are closely linked together The Malaysian bond market first jump started through the regulation and establishment of the government bond market, which was the basis to establish trust and confidence in the corporate bond market Increasing the efficiency of the government debt market is a way to help develop the corporate bond market Debt strategy is aimed at benchmark building and yield curve formation, progressively introducing longer-term maturities and avoiding crowding out by manageable cost-ofgovernment debt The involvement of high-quality issuers and the focus on sectors that will drive socioeconomic development such as infrastructure and quasi-governmental entities with strong reputations and roles in the economy (Cagamas the secondary mortgage company, for example) helped spearhead the development of the domestic bond market Institutional investors are included in early strategic discussions to understand their risk appetite such as those with high investment-grade credit ratings who are ready for initial investments, and the use of domestic CRAs to play an active role in credit-risk assessment iv) Priority sectors like infrastructure and housing Preconditions to develop the bond market are the PPP framework, supportive regulations for investors, a solid pilot demonstration transaction with some form of government support, and the IPP take-or-pay arrangement Develop a mortgage-backed securities market, expanding the underlying asset pool for pilot transactions that were low-risk, such as government staff housing loans that were deducted at source Consider creating a secondary mortgage company (with necessary government support) 1.2.2 Intermediate or developed stage i) Policy and regulatory framework When the investor market reached a level of maturity, particularly from 1996, the SC moved to a more nimble and efficient disclosure-based regime, shortening the time to the market from 4-5 months to 14 days The SC also allowed for continuous drawdowns in the most efficient and least time-consuming manner by using the Shelf Registration for Bond Programs However, their approval standards and criterias are strict and clearly defined Clear definitions of an eligible issuer and bond is provided, credit rating, trustee and trust deeds are 12 required, in addition proceeds are clearly required to be used for disclosed purposes (Securities Commission Malaysia, 2017) ii) Supporting the demand side The government encourages more investment products through collective investment schemes, as well as funds to diversify the investor pool and reduce the prominence or dominance of large buy-and hold investors and focus on increasing and progressively promoting the participation of retail investors through exchange-traded products Financial technology such as investment platforms and portals are leveraged to achieve economies of scale, efficiency, and access to market and reduce intermediation The transition out of mandatory credit ratings allowed demand-driven ratings to drive the market iii) Supporting the supply side After traditional bonds are stabilized, the market moved to more sophisticated products such as ABS and expanded to other products in tandem with sector growth (for instance, use REITs when the property market becomes well developed) The development of a relatively sophisticated investment banking sector is needed to be able to support the development of corporate instruments, perpetuals, hybrid securities like debt-equity features, and other advanced instruments iv) Priority sectors like infrastructure and housing The government rebalances the risks progressively Moreover, when the real estate market is sufficiently developed, they create products to coincide with sector growth, such as REITs 1.3 Lessons learned Malaysia’s experience reflects the need for an enabling environment underpinned by sustained macroeconomic stability, a robust banking sector, and a sound legal framework as the foundation for capital market development Macroeconomic stability eliminates uncertainty in economic activity, increases the country's investment attractiveness, as well as increases the economic activity in the future The level of macroeconomic stability is the key to assessing investment risk The legal and institutional framework in the country also ensures that the state control over natural resources remains central to forest resource management The country’s robust growth has allowed for a regular increase in income, which combined with economic and political stability, has stimulated and promoted high domestic savings with a long-term focus The role and commitment of the government is crucial Malaysian policies have supported the institutions, legal framework, incentives (including tax incentives), and the market infrastructure that created confidence among players to take on new investment opportunities, especially in priority sectors such as infrastructure Two such institutions have played core roles The Securities Commission in Malaysia and Central Bank of Malaysia quickly acquired legitimacy in the supervision and development of Malaysian financial markets Further, the Employees' Provident Fund, a public pension fund, effectively channelled a significant share of Malaysians' private savings in the domestic bond market This enabling environment has been developed progressively by combining a clear vision and merging of real and financial sector objectives to allow cohesiveness of policies and the 13 effective participation of other stakeholders such as potential issuers, institutional investors, and financial intermediaries - to whom the authorities have been leaving space for the private sector to drive innovation The solid cohesion and coordination between the various stakeholders has allowed an adequate sequencing of market developments The successive capital market development strategies reflected both the government’s agenda and the interests and capacities of other stakeholders, as well as Malaysia's position in terms of innovation and liberalization, indicating the level of market and investor maturity South Korea 2.1 Background history: The turning point of the bond market Before the financial crisis, Korea did not have to issue large quantities of government bonds, due to observing its balanced budget principle Once the crisis had broken out, however, the long-cherished principle of maintaining balanced budgets was abandoned, and the government began to actively issue bonds to finance the soaring fiscal deficit and support economic recovery With technical support from the IMF and the World Bank, Korea also embarked, in a step-by-step manner, on a series of institutional improvements These included the introduction of regular government bond auctions, the establishment of a primary dealer system, the integration of different government bonds, the opening of the Korean government bond futures market, and the introduction of a fungible issue system 2.1.1 Formation and Development The Government of the Republic of Korea issued its first bond, a National Foundation Bond, in 1950 to promote economic growth and finance post-war reconstruction As the market and economic conditions have changed over time, the bond market has intermittently seen dominance by either corporate bonds or government bonds such as Grain Bonds, Monetary Stabilization Bonds (MSBs), and Korea Treasury Bonds (KTBs), among others Because the issuance of National Foundation Bonds was subsequently suspended due to growth in the national debt and fiscal soundness concerns, the publicly offered corporate bond market, which was established in 1972, grew rapidly on the basis of institutional support, including firm commitments, payment guarantees from financial institutions, and mandatory listing on a securities exchange; and policy measures for spurring demand such as the establishment of investment trust companies Figure: Korean Bond Market Expansion Prior to the 1997/98 Asian Financial Crisis 14 Sources: Korea Exchange, Korea Financial Investment Association 2.1.2 After the 1997/1998 Asian Financial Crisis The bond market underwent dramatic changes and emerged structurally different in the post-crisis period First, the market shifted its focus from corporate bonds to government bonds, centered on KTBs Second, corporate bonds accounted for a decreasing portion of the bond market, while non-guaranteed bonds replaced the previously dominant guaranteed bonds in the corporate bond market Third, the bond market became more diverse with the advent of assetbacked securities (ABS) and structured securities whose underlying assets consisted of bonds A rise in the share of foreign investment in the bond market also resulted from increased market diversity From the mid-2000s onward, guaranteed bonds almost disappeared from the corporate bond market By contrast, government bond issuance was on the rise, owing to the government’s policy to nurture the KTB market 15 (MSB = Monetary Stabilization Bond.) Source: Koscom 2.2 Major policies After the financial crisis in Asia, South Korea has introduced the system of valuation at market prices, and gradually expanded the scope of application The application of this system in determining CB prices is aimed at increasing the transparency of bond prices Unlike stocks, each bond issue has characteristics independent from each other even when the same issuer Therefore, not all bonds are traded on the market Therefore, it is difficult to determine bond prices based on outstanding bonds These features are incorporated into the market pricing system; Accordingly, bond valuations are set up to estimate fair value of the bonds and publicize bond prices In 1999, Korea established bond valuation agencies, which function in bond valuation and provide bond price information services This system has contributed to making the CB market more transparent and the secondary market more efficient (Hwang, 2016) The credit rating system is becoming more and more important for the development of the Korean bond market Although Korea has established credit rating service for Korean investors (Korea Investors Service - KIS) since 1985, along with credit rating organizations formed later such as National Information and Credit Evaluation (NICE) and Korea Management and Korea Management and Credit Rating Corporation, until the 1997 financial crisis duties were not respected To improve credit rating standards, in August 1998, KIS entered into a joint venture with Moody's Investors Service A number of measures were introduced to make the OTC market more transparent For example, the "15-minute rule" was introduced in 2000, and the Bond Quotation System (BQS) in 2007 Under the pre-and post-trade transparency regime for the OTC market, the online bond trading system FreeBond was launched in 2010 to organize the OTC market and facilitate OTC transactions Also, based on its experience in overcoming the 1997/98 Asian financial crisis, the 16 Republic of Korea continued along a stable growth path with relatively less exposure to the effects of the global financial crisis that began in late 2007 The bond market has also become more transparent after the crisis with the requirement to determine bond prices on the basis of mark-to-market bond valuation and market bond yields Interest rate fluctuations become an important risk that investors in the market must be careful when investing in bonds and hedging the risk of interest rate fluctuations The Bank of Korea's information system on interest rate fluctuations and monetary policy moves is also publicly available for market members to monitor and adjust their investment portfolios Singapore 3.1 Structure and historical background of corporate bond market in Singapore One of the important components of the Monetary Authority of Singapore’s (MAS) efforts to strengthen Singapore’s position as a global financial center has been the growth of the debt markets in the city-state The debt markets in Singapore are made up of three major segments: the Singapore government securities (SGS) market, the Asian dollar bond (ADB) market, and the Singapore dollar corporate bond (SDCB) market To be more specific, the SGS market remains the largest segment of the debt markets, followed by the ADB market (although it has been promoted by MAS since 1971), and the smallest segment is the SDCB market The Singapore dollar (SGD) corporate debt market has grown significantly in the last decade Total outstanding SGD debt reached S$150 billion as at end 2017 The market consists of a wide range of instruments as well as issuers from across the credit spectrum The tenors of corporate debt issued vary from to 40 years and include perpetual bonds; the majority have maturities of between and 10 years In 1998, property companies were the dominant issuers, accounting for about 79 per cent of total issuance in Singapore dollar corporate bond market But by 2000, the issuer mix had become more balanced, with the rise in the proportion of other issuers: statutory boards and foreign entities This was the result of a two-pronged strategy by MAS to promote its corporate bond market The first prong in the development plan had been the encouragement given to statutory boards and government-linked corporations (GLCs) to tap bond markets rather than opt for direct bank lending And the second one had been the opening up of the Singapore dollar bond market to foreign issuers This was accomplished through MAS Notice 757, introduced in August 1998 and amended in November 1999 After that, many supranationals and multinationals had been quick to make their debut in Singapore, which could help to raise the visibility of their organizations Foreign issuers could also be attracted to the Singapore market because of the low borrowing cost and large pool of Singapore dollar funds In recent years, Singapore is one of the most international bond markets in Asia, with foreign issuers making up 25% to 30% of total annual issuance volumes for SGD corporate debt The issuers include supranational agencies, corporations, and financial institutions They are mainly from Europe and Asia, with an increasing diversity of issuers from other regions 17 Corporate debt in Singapore includes the corporate debt, hybrid securities, medium-term notes, and securitised debt securities, in which corporate debentures make up the largest segment of corporate debt They are negotiable, unsecured debt securities issued by corporations, financial institutions, supranationals, government agencies and statutory boards 3.2 Market situation In 1998, property companies were the dominant issuers, accounting for about 79 per cent of total issuance in Singapore dollar corporate bond market But by 2000, the issuer mix had become more balanced, with the rise in the proportion of other issuers: statutory boards and foreign entities In recent years, Singapore is one of the most international bond markets in Asia, with foreign issuers making up 25% to 30% of total annual issuance volumes for SGD corporate debt The issuers include supranational agencies, corporations, and financial institutions They are mainly from Europe and Asia, with an increasing diversity of issuers from other regions According to the Money Authority of Singapore (MAS), Singapore’s corporate debt market performed well in 2019 Total debt (i.e short-term and long-term) issued reached SGD 233 billion in 2019, close to the SGD 236 billion issued in 2018 NonSGD debt issuance volume amounted to SGD 204 billion, compared to SGD debt issuances of SGD 29 billion, underscoring the strong international characteristics of Singapore’s corporate debt market Total debt (i.e short-term and long-term) outstanding grew 11% year-on-year to reach SGD 472 billion, representing a CAGR of 8.5% since 2015 SGD debt outstanding reached SGD 165 billion while non-SGD debt outstanding reached SGD 307 billion.In 2021, Singapore’s debt market still saw steady growth, with total outstanding debt arranged by financial institutions in Singapore registering a 8% growth to SGD 523 billion as of 31 December 2021 The SGD corporate debt market continued to serve the needs of a well-diversified range of issuers in 2019 Corporate issuers accounted for the majority of issuance volume, at 45.6% for both non-property and property corporations, an increase of 6.9% over last year, other issuers were financial institutions and government agencies In the non-SGD corporate debt market, financial institutions continued to account for the majority of issuances, at 79.6% Amongst nonfinancial institutions, corporations (excluding property) formed the largest segment In 2019, Singapore’s debt market continued to support issuers’ funding needs in foreign currencies NonSGD debt issuances accounted for 87.7% (SGD 204 billion) of total debt issuances in 2019, in line with 2018 USD remained the primary currency of issuance, accounting for 69.3% of total issuance volume in 2018 3.3 Major policies The development of the corporate bond market in Singapore was the result of a different strategies by MAS to promote its corporate bond market 3.3.1 Building critical mass and diversity of issuers A two-pronged strategy by MAS to promote its corporate bond market was adopted The first prong was the encouragement given to statutory boards and government-linked corporations (GLCs) to tap bond markets rather than opt for direct bank lending Learning from the experience of the crisis-hit countries in East Asia, where bank balance sheets were under 18