Corporate bond issuance took a dive in the first half of 2022 amid lower bond interest rates.
Source: The Hanoi Times
According to MB Securities, over 183.5 trillion VND (7.8 billion USD) of corporate bonds were issued in the first six months of the year, down 10% year on year. Of which, just 5.3 trillion VND went to investors through public offerings.
The second quarter saw 112.8 trillion VND of corporate bonds offered to the financial market, also 10% lower than the same period last year.
Six-month weighted average maturity (WAM) was 3.2 years, roughly 0.69 years less than the figure in 2021. Average bond interest rates stayed at 6.4%, around 1.7 percentage points short of last year's number.
Among the largest issuers, the banking sector took the lead with a total six-month issue of 90.1 trillion VND and a WAM of 3.76 years. Of which, banks offered 80.7 trillion VND worth of bonds in Q2 alone.
The realty sector came next with about 10.8 trillion VND in Q2. The figure paled in comparison with its total issues in early 2022, which hit 44.5 trillion VND and had a WAM of 2.45 years.
Other sectors made up 48.8 trillion VND of the total corporate bond on sale in the first half of 2022. Notably, construction firms offered 17 trillion VND with a WAM of 2.27 years.
FinnPro's data showed that about 2.8 trillion VND of corporate bonds were issued in the first half of August and the banking sector remained the largest issuer.
Vietcombank took the biggest share of the pie with 1.5 trillion VND, followed by Agribank with 600 billion VND and ACB with 300 billion VND.
VietinBank and VietCapital Bank also got in on the act with 50 billion VND and 60 billion VND, respectively.
Most issuers employed private placement to raise bond money since public offerings require high costs and high standards. For that reason, the latter involves banks only.
Financial expert Nguyen Tri Hieu underscored capital expansion as the main reason for banks to issue such large volumes of bonds.
Banks had to raise the proceeds, he believed, to consolidate their financial ratios and deepen financial buffers amid a period of mounting credits that outpace their equity.
Another reason for banks overwhelming the bond market is that loan restructuring specified by Circulars No 01, No 03 and No 14 has caused some cash flows to not return to banks in the short term.
Banks had no other choice but to issue bonds to make up for the late-returned cash flows.
The State Securities Commission has recently announced that issuers, which are not public companies, will issue privately-placed bonds under the guidance of the Law on Enterprise and Decree No 153.
That means they are held responsible for their own issuance and no pre-issue registrations, approvals, or official notifications are required.
The commission also stressed that only professional investors are eligible to purchase privately-placed bonds and the investors take responsibility for their own investing decisions.