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Plan to boost bond market
The Ministry of Finance will attempt to raise the liquidity and attractiveness of the nation’s bond market during 2009, a ministry official told Vietnam News Agency on condition of anonymity, following last week’s Vietnam Business Forum .
Among planned measures, the ministry would increase the number of bonds issued in large batches over the current practice of issuing issuing smaller batches, the official said.
The ministry will also restructure existing bonds by organising them into several basic classes, a move expected to help boost their value and liquidity on secondary markets.
A capital markets working group set up by a number of fund management firms confirms that there are currently more than 500 Government bond issues outstanding with an average size of less than 20 million USD.
“The absence of large, tradable bond issues leads to an illiquid and inefficient market,” said group member Dominic Scriven.
The working group has suggested that market regulators make bond issues of 300 USD to 500 million USD, which would have a more significant impact on market depth and liquidity.
The regulators should also consider a buyback or convertibility programme for several smaller bond issues to be replaced by a few larger issues, the group has said, as well as marketing bonds to a broader investor base.
As part of its plans to boost bond market, the ministry official said it was encouraging enterprises to look for ways to corporate bond issues instead of bank loans as a way to raise capital for projects or business expansion.
A wide variety of corporate bonds would help diversify the markets not only as a channel for raising capital but also as a way to market domestic trademarks overseas.
The ministry was also exploring derivatives, future contracts and other options to diversity bond trading. “Market regulators should set up a legal framework to instruct investors in using these,” said independent securities analyst Huy Nam.
By October of this year, Government bond issues had raised 18.7 trillion VND (1.11 billion USD), representing 52 percent of the year’s target, according to ministry figures.
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