In a blog post late last year I covered an overview of the Vietnam bond market, more specifically the focus was on Vietnam government bonds.
This time I shall focus on Vietnam corporate bonds, which are predicted to continue to make up a growing percentage of overall bonds issued. We have seen that trend already looking back over the last decade.
For a recap of the Vietnam government bond market, refer to the link to the previous blog post below:
OVERVIEW OF VIETNAM GOVERNMENT BOND MARKET
Part 1 below focuses on the Vietnam government bond market
VIETNAM CORPORATE BOND MARKET YIELDS
It is hard to come up with good long term statistical data in terms of what you can expect to yield when investing in Vietnam corporate bonds.
I thought however the below link from VN Express provides a good backdrop of what some recent corporate bond issues were offering.
Corporates turn to bonds to overcome cash shortage – VnExpress International
Given that banks and real estate companies tend to dominate the issuance of cororate bonds in Vietnam, I note the below quotes from the above link as a guide:
“Banks topped the list, accounting for 40 percent of the total value. Most of them offered coupon rates of 3-4.2 percent.”
“Most real estate developers offered over 8 percent.”
That is probably not such a bad guide to give as an example.
VIETNAM CORPORATE BOND MARKET SIZE
We can see from the below table that the Vietnam corporate bond market continued its growth momentum in 2020 in a significant way.
Corporate debt as a percentage of all bonds outstanding in Vietnam was getting closer to circa 15-20% in 2020, and recent data suggesting we are over that 20% mark now. As a percentage of GDP, the Vietnam corporate bond market has the potential to get to around 10% in the not too distant future. However this is still quite small in comparison to other bond markets in Asia.
Some of the strong growth in corporate bond market issuance in 2020 might have been a bit of front running from issuers to get in before many new rules and regulations were set to come in. Such increased rules though are all about more transparency, and a positive for the long term development of the Vietnam corporate bond market.
For context, in 2019 & 2020 in terms of new issuance in the Vietnam bond market, we are seeing just as much through the corporate sector as we have from the government.
VIETNAM CORPORATE BOND MARKET MATURITY DATE PROFILE
Like other global bond markets, the corporate bond market sector in Vietnam has historically centred around issuance by banks and real estate companies.
Expect most issuance to concentrate in the 2–5-year part of the curve, once again that is reasonably consistent with other global debt markets.
Having said that there was a trend in 2020 that saw the average tenor grow as we saw some longer date issuance beyond the 5-year part of the curve.
TRADING / LIQUIDITY / OWNERSHIP OF VIETNAM CORPORATE BONDS
In terms of ownership of the Vietnam corporate bonds we have similar players to that of their government bond market.
For that reason, I shall note the below charts of the entire Vietnam bond market again here in this section:
If we were looking at the charts above specifically for the corporate bond market, then private individuals as a category would be a notable presence on their own.
Perhaps an opportunity exits in the longer term for Vietnam retail investors to even more embrace investing in their corporate bonds. For an individual to earn an interest rate on their bank deposit that might have a chance of somewhat keeping up with inflation is getting near impossible like everywhere else in the world!
In the future, much work will continue to be done to improve the growth, governance and liquidity of the Vietnam corporate bond market. As I mentioned earlier it is still quite small compared to many neighbouring countries. Below is a link to a recent article that explores this continuing goal.
The future for such growth looks bright in the context of a government bond yield curve that over the last couple of years as been crunched lower along with global trends. As investors look for safer alternatives to the stock market, yet still have a need for higher returns on offer than say bank deposits or government bonds, the structural demand growth should continue.
Challenges exits with growing the interest from institutional investors. Tentative institutions would prefer to see the liquidity there first, ideally maybe credit rating agency services and overall better stock exchange infrastructure etc.
VIETNAM REAL ESTATE?
When thinking about investing in the stock market of any country, it is useful to consider alternative asset classes such as the bond market and real estate market. To learn a bit more about the latter you can refer to the below previous blog post of mine.
CAN A FOREIGNER BUY REAL ESTATE IN VIETNAM?
Some may be surprised to learn how in 2015 Vietnam took some key steps to make it easier for foreigners to buy Vietnam real-estate.
CAN A FOREIGNER BUY REAL ESTATE IN VIETNAM? – VIETNAM STOCK MARKET (vietnamesestockmarket.com)
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