16:10 | 29/03/2017 Finance - Banking
(VEN) - The Ministry of Finance plans to submit to the prime minister a roadmap for the development of the bond market during the 2017-2020 period, with a vision to 2030, along with a new decree on corporate bonds.
The specific targets being drafted for 2017 and beyond are meant to help the bond market become one of the most important capital raising channels for the economy. The legal framework of the bond market will be further improved to create the most favorable conditions for investors to raise capital and attract long-term investors.
In addition, the government bond market, set to be a model in the financial market, will be developed. Moreover, the Ministry of Finance will deploy new products such as bonds at floating interest rates.
Phan Thi Thu Hien, the head of the Ministry’s Finance-Banking Department, said at a press conference in Hanoi on February 28 that as many as VND281.75 trillion worth of government bonds were issued in 2016, equivalent to 98.3 percent of the yearly target. Ninety-one percent of them offered maturity of at least five years. Moreover, 30-year government bonds were issued to foreign investors for the first time.
According to the Ministry of Finance, thanks to restructuring, the government debt portfolio showed significant improvements and attracted capital accounting for 27.3 percent of the gross domestic product (GDP) in 2016 compared to 16.2 percent in 2015. The average term of the bonds sold was 8.71 years, 1.73 years longer than in 2015. This extended the average maturity of the government debt portfolio by the end of 2016 to 5.98 years, up 1.54 years against late 2015. The average coupon was 6.49 percent, down 0.22 to 0.5 across the board.
Corporate bonds also grew strongly in 2016. Nearly VND129.64 trillion worth of corporate bonds was sold last year, an increase of 203.1 percent compared to 2015, gradually becoming the capital raising channel for businesses to develop trade and production activities. In addition, investors experienced a positive change with a rise in the holding of long-term bonds such as social insurance, deposit insurance and bonds issued by insurers from 23 percent in 2015 to 44.6 percent in 2016, while the holding of bonds launched by commercial banks fell from 77 percent to 55.4 percent.
Despite many positive results, the weak points of the Vietnamese bond market persisted. Among them, the small scale (accounting for only 36.9 percent of GDP) and not yet developed corporate bonds (accounting for a mere 5.27 percent of GDP). In addition, businesses mainly raised capital through credit channels.
The State Treasury will issue VND183.3 trillion worth of government bonds to the market in 2017.