Important channel
In 2021, the corporate bonds market was worth a total of VND 722,700 bn, an increase of 56% compared to 2020. According to a report of the Saigon Securities Company (SSI), the total amount of corporate bonds in circulation by the end of 2021 reached about VND 1,400,000 bn, equivalent to an average growth rate of 46% per year in the period 2017 to 2021. Accordingly, the size of the corporate bonds market increased sharply from 4.9% of GDP in 2017 to 16.6% of GDP in 2021. The size of the stock market and corporate bonds increased rapidly from 68% in 2020 to the equivalent of 88% in 2021 compared to the total credit balance of the whole economy.
According to statistics from the Ministry of Finance, in the period 2016 to 2020, the corporate bonds market was the component with the strongest growth in the financial market, becoming an increasingly important capital mobilization channel for businesses in the context of low credit growth. The total volume of corporate bonds issued was about VND 1,200,000 bn, an average of nearly VND 239,000 bn per year and about nine times higher than in the 2011 to 2015 period. The average growth rate of the corporate bonds market is 48% per year, and the size of the corporate bonds market by the end of 2020 reached nearly 16% of GDP, more than four times that in 2016.
In the market, real estate enterprises are the largest bond issuing group with VND 318,200 bn, up 66.3% compared to 2020, and accounted for 44% of total issuance in 2021. On the other hand, banks issued goods worth VND 226,400 bn, accounting for 31.3% of total issuance and an increase of 73% compared to 2020. This figure partly comes from the need for capital to cover the bond repurchase, of upto VND 67,000 bn. In addition, energy and mineral groups, non-banking financial institutions, and infrastructure development issued VND 28,000 bn to VND 30,000 bn, accounting for about 4% of the total issuance. In this, the issuance volume of non-banking financial institutions of mainly securities companies, and infrastructure development group, increased significantly compared to 2020, by 152% to 225%.
Therefore, besides credit and the stock market, corporate bonds are also an important and effective capital mobilization channel for listed companies at the present time. According to Ms. Nguyen Thi Thanh Tu, senior analyst at SSI, this growth is in line with the capital market development orientation of the management agencies, reducing the dependence of enterprises on bank credit.
Basis for bank capital
According to one economic expert, in the context that bank credit is controlled by risky channels, corporate bonds are the basis of many infrastructure enterprises, real estate enterprises, and enterprises that have difficulty accessing bank capital. In fact, the state management agency itself, and the State Securities Commission, have also highly appreciated the effectiveness of corporate bonds. According to a representative of the State Securities Commission, at the corporate bonds market review in 2021, corporate bonds have now become a relatively large capital mobilization channel in relation to credit loans from banks, as well as mobilization channels through the stock market.
According to the State Securities Commission, corporate bonds have helped all types of businesses raise capital for production and business, and oriented investors to focus on medium and long-term investments instead of short-term savings. Corporate bonds also help reduce risks for commercial banks in mobilizing short-term capital for medium and long-term loans and improve publicity and transparency in the process of raising capital in Ho Chi Minh City. Especially now when the pandemic is under control, the volume of corporate bond issuances has also increased rapidly, showing that businesses are promoting the issuance of bonds to mobilize capital to restore production and business.
One of the successful bond issuance listed companies in 2021 was the Thanh Thanh Cong-Bien Hoa Joint Stock Company (SBT). Last year, SBT successfully offered VND 2,300 bn of bonds from a cooperation agreement with Techcom Securities (TCBS) to issue a bond package to the public, worth VND 700 bn, and also a private bond package of VND 1,200 bn. Along with this was a private bond of VND 400 bn purchased by Vietinbank. The two years, 2020 and 2021, are considered successful years of SBT in capital mobilization, of which the most impressive is still the bond issuance activity when contributing nearly 77% of the total capital raised by this enterprise.
The above bond issuance deal has just been honored by The Asset, the leading prestigious publication on finance in the Asian market, in the category of The Best Local Currency Bond 2021, within the framework of The Asset Triple A Award 2021. According to The Asset, SBT fully unsecured issuance of credit to the public was successful at a time when the global capital market was greatly impacted by the Covid-19 pandemic. It has shown investors' firm belief in the outstanding capabilities and prospects of enterprises.
The NoVa Real Estate Investment Group Joint Stock Company (NVL) is also an enterprise that is evaluated for effective bond issuance. NVL has successfully issued to foreign investors USD 300 mn of international convertible bonds, without warranty or without any collateral, and will be listed on the Singapore Stock Exchange (SGX). The issuance received great interest from many reputable international investors with the registration value many times higher than Novaland's USD 300 mn issuance plan.
According to information from NVL, the capital mobilized from this issuance will be focused on developing key projects of the company and increasing the land fund in order to complete the profit plan in the next three years. Besides, the success of this capital transaction will contribute to a better structure of NVL's debt due to the significant increase in the composition of medium and long-term debt.
