Vietnam’s real estate corporate bond market hits over US$8 billion

The issue size of corporate bonds of real estate companies in Vietnam was estimated at VND189 trillion (US$8.26 billion) by late 2021.

Credit risks from the real estate market may impact the assessment of Vietnam’s sovereign rating in the international capital market. Photo: The Hanoi Times

From the total, 73%, or VND138 trillion ($6 billion), are due for maturity during the 2022-2024 period, a report from the local rating firm FiinGroup noted.

“This would not only put a huge pressure on real estate companies during the post-pandemic period but also causes liquidity risks on financial institutions having committed to acquire those bonds, such as securities companies and banks,” the agency added.

FiinGroup suggested bond repayment pressure could also pose risks to the stock market, as stocks are being used as collateral for bonds.

Meanwhile, US dollars-denominated loans of local property developers stood at around $4 billion.

“The figure is not a huge sum given the size of total credit loans in the real estate sector, equivalent to 7.04% of total outstanding loans,” FiinGroup continued.

FiinGroup, however, suggested credit risks from the real estate market may impact the assessment of Vietnam’s sovereign rating in the international capital market.

This, in turn, would result in higher interest rates for Vietnamese companies and subsequently negative impacts on their competitiveness against foreign-invested companies operating in Vietnam or international markets.

The urgency to stabilize stock and corporate bond markets

Prime Minister Pham Minh Chinh on April 11 issued a directive calling for measures to stabilize and ensure the healthy development of the stock and corporate bond markets.

The move came following the arrests of Chairman of the FLC Group Trinh Van Quyet and Do Anh Dung, chairman of Tan Hoang Minh Group for unlawful practices in the financial markets.

Under the directive, the Ministry of Information and Communications and the Ministry of Public Security would be responsible to deal with those publishing false and inaccurate information that may cause negative impacts on the business/investment environment.

The Ministry of Finance, the State Bank of Vietnam, and the Ministry of Planning and Investment are tasked with monitoring the domestic and international financial markets to timely intervene if needed.

“Government agencies should provide accurate information on the safety of the financial-monetary system, and the implementation of the economic recovery program to gain trust from the business community,” stated the directive.

There have been growing cases of market manipulation in the stock market that caused severe consequences for investors.

Regarding the corporate bond market, the Ministry of Finance informed over half of the corporate bonds issued via private placement do not have guaranteed assets.

“An overheated corporate bond market may pose risks to the economy,” stated the ministry.