Many businesses had issued one-to-three-year bonds, with a fixed interest rate of 13 percent per year, twice as much as the savings rate at banks. The Ministry of Finance had recommended that individual investors should be aware that information on new bonds because of high interest rates.
While banks’ credit growth was slow, the corporate bond market was still very active in the first half of the year. According to the Hanoi Stock Exchange’s report on corporate bond issuance, the volume of individual bonds issued in May was 27.061 trillion dong, the total amount of individual bonds issued in the first five months in 2020 was 91.616 trillion dong, up 15 percent over the same period in 2019.
While savings rates at banks continued to plummet, corporate bond rates were still higher, and not much lower than last year. Even the interest rate on bonds was then double that of savings.
Observing on the market, banks were the group that issued bonds with the lowest interest rates, only about 5.5 percent to 6.5 percent per year for two-to-three-year bonds and 7.2 percent to 9,6 percent per year for terms of six years to 15 years. Except for the banking group, other businesses were issuing bonds with much higher interest rates, ranging from 10 percent to 13 percent per annum. In particular, many companies issue bonds with interest rates of 12 percent to 13 percent per year, including Phat Dat Real Estate, F88 pawn chains, Hung Loc Phat Real Estate, BCG Land, Indochina Real Estate.
Specifically, the Phat Dat Real Estate Development Joint Stock Company (PDR) on June 16 had issued one-year bonds with a scale of 100 billion dong, a fixed interest rate of 13 percent per year for a three-month payment period. In this issuance, institutional investors bought 70 billion dong of PDR bonds, while individual investors held 10 billion dong.
BCG Land successfully issued 200 billion dong of bonds from June 11 to June 24. The bonds had terms of 12 months and one day. The interest rate was 12 percent per year, with a term of interest at three months per time.
IDJ Vietnam Investment Joint Stock Company on June 3 issued 10 billion dong of three-year bonds. The fixed interest rate of 13 percent per year. JSC International Relations Investment production on 11/6 issued 50 billion bonds of the one-year term with a fixed interest rate of 13 percent per year, paying interest every six months. F88 pawn chain from the beginning of the year until then also issued 151.57 billion dong of one-year bonds with a fixed interest rate of 12.5 percent per year, paying interest once every three months.
In general, real estate and construction were still in the highest interest rates and the top number of businesses issuing from the beginning of the year until then.
Before the excitement of the corporate bond market, the Ministry of Finance had repeatedly made recommendations to issuers as well as investors. The Ministry of Finance recommended that only when understanding the information of bonds and carefully considering the risks that might be encountered, investors, especially individual investors, should buy bonds because of high interest rates. As there was a possibility that the bond investment (including both principal and interest) could not be recovered if the issuer encountered difficulties.
Investors also needed full access to information, analysis and careful assessment of possible risks to bonds. Before deciding to invest, it was required to request the issuing enterprise and the distribution organisation to provide complete and accurate information on the financial situation of the issuing company, including the status of raising capital from bonds (amount and volume of issuance, outstanding debt at the time of expected publication, payment of interest and principal issued bonds); the purpose of issuing bonds, security assets of bonds, characteristics of bonds, rights and obligations of bond owners, commitments to bonds, obligations of issuing businesses, obligations distribution organisation’s case for bonds.
For bond issuers, it was necessary to calculate specific cash flows to develop a feasible bond issuance plan, ensuring debt repayment; comply with the law on bond issuance; use capital from bond issuance associated with the purpose of publication. Notably, the Ministry of Finance suggested not to sell to individual investors but divided into multiple issues with many bond codes; take measures to fully and timely fulfill commitments to investors, including obligations on the repurchase of bonds before maturity.
Regarding the bond distribution organisation, the Ministry of Finance requested issuers not to invite to distribute bonds to investors at all costs and to be responsible for providing investors with adequate and accurate information on the financial situation of the issuing business.