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Asia Bond Monitor
The Government’s stimulus package will help strongly expand Viet Nam’s bond market this year, forecasts the latest edition of the Asian Development Bank’s Asia Bond Monitor.
The same is true of other emerging Eastern Asia markets, it says.
The monitor also forecasts that companies will turn to domestic markets to refinance or raise fresh funds.
The monitor notes that Viet Nam posted its fastest quarterly rate of growth in the fourth quarter of 2008 and its economy grew more quickly than other countries for the entire year.
Viet Nam’s VND17 trillion (US$972 million) economic stimulus package will be used to subsidise 4 per cent of the interest rate enterprises pay for their loans and provide small businesses with credit.
Much of it will be financed through the issue of Government bonds.
Seeking safety
Investors have turned to bonds as they seek safety as the economy contracts and yields dropped further last month from their heights in September.
The yield for the benchmark 10-year bond was down 565 basis points to 9.4 per cent on January 22 while the yield for the two-year note was down 791 basis points to 8.5 per cent.
The Ministry of Finance plans to change the rules for the issue of Government bonds, guaranteed bonds and local government bonds as a way to support restoration of Viet Nam’s bond market.
And the guidance for corporate bond issues is expected to be published in 2010 to help enhance the additional mode of investment for both international and domestic investors.
Bond trading group
Bond traders also plan a Viet Nam Bond Trade Association that is expected to operate according to international standards.
The State Bank of Viet Nam has issued guidelines intended to cushion the economy from the worst of the global insolvency crisis.
They include the strict monitoring of the money market; banking-system reform; increasing the availability of credit for the worthy borrowers and creating better risk-return likelihood.
The value of Government bonds outstanding totalled VND217 trillion ($12.4 billion) as of the end of December, up 41.9 per cent year-on-year.
The value of corporate bonds outstanding was up 69.4 per cent year-on-year as of December 2008, amounting to VND9.03 trillion ($517 million).
The ADB monitor says emerging East Asia’s domestic currency bond markets held up well in face of the global financial storm and had continued to expand throughout 2008.
The ADB defines Emerging East Asia as the 10 members of the Association of Southeast Asian Nations plus mainland China, Hong Kong and South Korea.
Mainland China’s $2.2 trillion in outstanding bonds at the end of 2008 dwarfed the others.
But the ADB warns of risks for the emerging Eastern Asia markets including Viet Nam.
Increased sovereign bond sales could raise yields and make issuance costlier, it says.
Investor worries about sustained fiscal deficits could push up risk premiums and hurt sovereign credit ratings.
Enterprises would then face greater financing risks and higher borrowing costs and may get crowded out by higher debt issuance by governments.
VietNamNet/VNS
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