Vietnam Company Bond Sales Jump as Nation Skirts Covid Recession

Vietnam’s fledgling local bond market is picking up steam, fueling investment in Southeast Asia’s only economy to have avoided a recession amid the pandemic.

Companies priced 326 trillion dong ($14.1 billion) of notes this year through Oct. 30 in private placements, a 61% jump from the same period last year, according to data from the Hanoi Stock Exchange.

Vietnam Company Bond Sales Jump as Nation Skirts Covid Recession

Growth in Vietnam’s export-driven economy ground to its lowest in decades earlier this year as the Covid-19 crisis hit demand. But early, strict measures helped the country contain the virus. Gross domestic product has continued to expand despite contracting elsewhere. Growth will accelerate to 7.9% next year, the fastest among its peers, according to analyst estimates.

The surge in privately placed debt issuance -- in which borrowers sell securities to pre-selected buyers -- prompted the government to try to rein in such deals. From September, authorities required issuers to keep their outstanding balance of private placement securities at time of issuance from exceeding five times company equity from the most recent quarter. They also stipulated that some borrowers have consulting contracts with an advisory firm for the issuance documents, among other stricter legal hurdles.

The move is in favor of public offerings, which are generally subject to more rigorous financial disclosures and are more active in more developed credit markets globally.

Vietnam Firms Move to Bonds Over Stocks for Funds on Virus Risk

“This trend could also help the development of the public bond market in Vietnam and it probably can grow at a faster pace” than Southeast Asian countries like Thailand, said Adisorn Singhsacha, founder and CEO of Twin Pine Group. The firm advises Vietnam and neighboring countries on financial market development.

The amount of local corporate bonds outstanding touched 3% of Vietnam’s gross domestic product in the second quarter, the highest since 2011, according to data from the Asian Development Bank compiled by Bloomberg. Still, that’s tiny compared to Thailand, where the local bond market totals almost 23% of GDP, and Malaysia, where it reaches 53%.

©2020 Bloomberg L.P.

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