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Hopes moderate for dollar bond auction
Ha Noi Securities Trading Centre deputy director Nguyen Vu Quang Trung expects satisfactory bidding when the first of $300 million worth of US dollar-denominated Government bonds are offered at auction today.
"Liquidity will depend on supply and demand for the dollar," the official said.
"But there are reasons to hope that the bonds will be traded satisfactorily because we know from market surveys that many institutional investors expect to take part in the bidding."
The deputy director said many investors holding dollars did not want to buy securities in the stock market because it had yet to rally.
They also did not want to shift to Vietnamese dong deposits with their higher interest rates because they worried about exchange-rate fluctuations.
The dollar-bonds were an opportunity for investors to obtain preferred interest rates while not having to worry about exchange-rate fluctuations, he said.
The Government approved the auction, to finance the State budget deficit, last month.
It will be held in three sessions: today, next Tuesday and Friday with $100 million worth of bonds on offer at each session.
"We will try to operate the market to best facilitate investor trading," the deputy director said.
"Well-implemented transactions will create favourable conditions for the Government to raise capital in this way."
State Bank of Viet Nam’s Foreign Exchange Management Department director Nguyen Quang Huy expects the commercial banks to be among the major bidders at the auction.
"Commercial banks are temporarily holding an excess of idle capital, so we expect them to be major bidders," he told reporters at a road show to promote the auction at the Securities Trading Centre on Tuesday.
Of individuals and organisations wanting to buy dollars from banks to take part in the auction, Huy said: "It will be difficult, as [credit] demand and supply are quite tight and banks are likely to give their traditional customers priority."
Independent financial analyst Mac Quang Huy told VnEconomy.vn, the online publication of the Vietnam Economic Times, that foreign investors in Viet Nam might buy the bonds as a short-term tool to manage their cash flows.
"They might spend their idle money on the foreign-currency bonds to limit the risks of a weakening dong," he said, adding that liquidity should be generated through the development of a secondary bond market.
He also believed a bid rate of about 4 per cent would make the auction successful.
Ha Noi Securities Trading Centre officials suggested potential investors use commercial-bank interest rates as their guide for the auction.
State Bank’s Nguyen Quang Huy said existing regulations precluded the use of foreign-currency denominated State bonds as collateral.
"This is a new problem," he said.
But the State Bank would soon issue detailed regulations about this to help commercial banks increase their liquidity.
These would deal with the buying and selling of the bonds in a secondary market, particularly individual transactions and foreigner participation.
The Ha Noi Securities Trading Centre will test a bond market with 30 members, including commercial banks and securities companies, in April, said its deputy director Nguyen Vu Quang Trung.
The results would be reported to the Ministry of Finance and the State Securities Commission in late April for assessment, he said.
Development of a dedicated bond market is a part of the market regulator’s effort to restructure the domestic stock market.
VietNamNet, Viet Nam News
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