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Bonds less attractive this year: Expert
The bond market is likely to be less profitable this year, says Nguyen Van Thuan, director of the accounting, finance and banking faculty at HCM City Open University.
In 2008, he noted, institutional investors earned higher returns from bonds, with stock prices and bank interest falling. I the period of June-October, bond prices were particularly low, he said, and offered interest rates of 15 percent per year on average, generally higher than what banks were offering.
“There’s little chance that that situation will repeat in 2009,” Thuan said. “It’s unlikely the Government will cut interest rates again in 2009 as the risk of inflation is too great,” he said, adding that the appeal of bond transactions would depend on the Government’s foreign exchange and interest rate policies.
Meanwhile, ceiling rates set for State bonds at 8-8.5 percent were unattractive to many investors, “although State bonds remain the choice of many institutions that prioritise safety in making investment.”
Vietnam Bond Market Forum chairman Do Ngoc Quynh in December pointed to the risks of a possible decline in bond market liquidity, saying foreign investors’ bond holdings had tended to shrink as they adjusted investment portfolios and sought lower risks, while banks and insurance firms, which had accelerated purchases of bonds last year, were likely to buy fewer this year.
Prudential Fund Management Co general director Pham Ngoc Bich, however, told Dau Tu Chung Khoan (Securities Investment) that the company was still concentrating on bond investments. “Among three channels – cash, shares and bonds – the third channel, in our opinion, still has the most potential,” he said.
Corporate bond issues would create additional opportunities for investors to take part in the bond market, but corporate bonds currently accounted for just around 1 percent of total listed bonds, said Thuan.
Dau Tu Chung Khoan quoted an anonymous director of a foreign investment fund in HCM City as saying that the domestic bond market had not developed because there were few corporate bonds.
“If it is necessary to encourage corporate bond issuance, as bonds are not only a channel for enterprises to raise funds, but also a place for people to park their idle capital,” Thuan said.
Nguyen Thi Hoang Lan, deputy director of the Hanoi Securities Trading Centre, said the development of a separate bond market would be a focus in the coming months.
vna
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