Imperative to revive cash flow in current market

Extension of bonds term

Besides the measures that bond issuers have taken now, such as buying back bonds ahead of time, amounting to about VND 147,000 bln in 10 months of 2022, or an agreement to swap bonds for housing projects with attractive discounts, or negotiating an extension of bonds maturity date, HoREA has proposed that the Ministry of Finance ask the Government to consider allowing extension of the bonds term by 1 year so as to reduce pressure and increase confidence in the corporate bonds market.

HoREA has proposed leniency to individual investors who are not professional securities investors and who buy individual corporate bonds at a certain rate through securities companies or competent agents as prescribed in Clause 6, Article 1 of Decree 65. The Vietnam Asset Management Company of Credit Institutions (VAMC) and commercial banks are allowed to buy corporate bonds.

The Government is of the opinion that allowing these organizations to buy corporate bonds will increase confidence in the bonds market and investors. HoREA welcomes the Ministry of Finance proposal to amend Decree 65 to stipulate that investors buying bonds must be professional securities investors with an account balance of VND 2 bln held continuously for 90 days, instead of 180 days as in the current regulations.

HoREA has proposed to urgently handle a number of difficulties and obstacles in the individual corporate bonds market. In the long term, it is proposed that the Ministry of Finance consider amending the Securities Law 2019 to complete the corporate bonds market in parallel with the stock market, to become the leading channel for mobilizing capital for the economy and striving to reach 50% of GDP by 2025 and 60% by 2030.

This will relieve pressure, and help credit institutions return to their main function of providing working capital for the economy. They should only use no more than 30% of short-term mobilized capital for medium-term loans according to the roadmap to gradually limit credit in risky areas such as securities and real estate.

Confidence in bonds market

Currently, the volume of bonds maturing by 31 December 2022 are valued at about VND 21,650 bln, about VND 119,000 bln in 2023, and about VND 112,000 bln in 2024. Therefore, HoREA has proposed a solution to handle the volume of bonds maturing in December 2022 and 2023. Specifically, HoREA has proposed the following solutions to handle the difficulties and obstacles of the individual corporate bonds market.

Firstly, HoREA recommends that real estate businesses continue to try to buy back their bonds before the deadline or have an agreement to swap bonds for housing projects with a discount of upto 40% to 50% of the selling price, or negotiate an extension of the bond term, or else convert the bonds into shares.

Secondly, the Ministry of Finance has said that the equity investment capital from the state budget in 2022 has not been disbursed by the Government to ministries, branches, and localities as of 30 November 2022, accounting for about 38.5% of the total public investment capital in 2022 allocated by the Government.

Therefore, it is proposed that the Ministry of Finance submit to the Government and competent agencies a solution that can use part of the public investment capital that has been allocated by the Government but the ministries, branches, and localities have not yet disbursed. This will allow the State to buy back the volume of corporate bonds maturing in December 2022 and the first 6 months of 2023, with much higher interest rates. This move will also support the bonds market, give businesses time to adjust their financial plans, and at the same time bring about market confidence and make appropriate adjustments.

Thirdly, HoREA has suggested that the criteria for corporate bonds be acquired by the state capital on first-time bonds, and bonds with assets to secure standard valuation. Hence, the money from corporate bonds sales be put into circulation to benefit the economy.

Fourthly, the Ministry of Finance must submit to the Government a proposal to amend Decree 65 so as to postpone bonds sales until the end of 2023. The need to this move will bring about a regulation so that investors who buy private issued corporate bonds are professional securities investors and registered for trading for at least VND 2 bln determined by the daily average market value of securities portfolio for a period of at least 180 consecutive days prior to the date of determination, because the determination of professional securities investors at this point is valid for three months from the date of confirmation. At the same time, investors buying bonds as individuals must have a written commitment to understand and be responsible for individual corporate bonds investment as prescribed in Clause 6, Article 1 of ND65.

Finally, the Ministry of Finance must ask the Government for permission to extend the bonds term period for another year so as to reduce the pressure of bonds maturity and increase confidence in the corporate bonds market.