Financial Management
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Financial Management. Annuity Commodity. VIETNAM BOND MARKET. Name: NGUYEN THI THIEN TAM ( 阮氏善心 ) ID: MA0N0216. A YOUNG AND GROWING MARKET. The Vietnam bond market development was boosted when Vietnam entered WTO in 2006. Total market capitalization is now at 15% of GDP.

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Financial Management

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Financial management

Financial Management

Annuity Commodity

VIETNAMBOND MARKET

Name: NGUYEN THI THIEN TAM (阮氏善心)

ID: MA0N0216


Financial management

  • A YOUNG AND GROWING MARKET

  • The Vietnam bond market development was boosted when Vietnam entered WTO in 2006. Total market capitalization is now at15% of GDP.

  • > 500 government bonds outstanding on some USD 12 billion

  • After 2008 foreign exodus the market today is predominantly Vietnamese with a handful of big players. In the absence of mutual funds and pension funds, banks dare key players.


Financial management

  • A YOUNG AND GROWING MARKET (cont)


Financial management

THE MARKET

  • Issuers

    •Government bonds: Issued by the State Treasury and authorized issuers such as Vietnam Development Bank (policy bank)

    •Municipal bonds: issued by city municipalities and provincial governments.

    •Corporate bonds: issued by SOE’s and private enterprises

  • Investors

    •Domestic investor base still small. Ability to absorb supply and demand shocks limited

    •Off-shore investors still limited (no limitation on foreign holdings of bonds)


Financial management

THE MARKET (cont)

  • Product range

    ●Mostly plain vanilla fixed coupon bonds

    ●Pseudo floaters fixed with 12m average deposit rate quoted by 4 big SOCB’s.

    ●Callable tier 2, convertibles although mostly with mandatory conversion.

  • Secondary market although on the increase, still thin

    ●Bond market tend to be very domestic

    ●At times >100 bps diff between public sources and the market.

    ●No surprise discrepancy tend to get worse during period of big movements.


Financial management

GOVERNMENT BONDS

  • Government bonds here are State Treasury bonds and VDB (Vietnam Development Bank).

  • Issued institutional debt since 2000. Steady levels of 8.3-8.6% prior WTO.

  • Approximately 500 government bonds outstanding as of August 2009 with an average size of <USD20m equiv. Listed onHNX.

  • Ceiling rates are defined by MOF

Source: DC, indicative, as end of August 2009


Financial management

MUNICIPAL BONDS

  • Approximately 65 Municipal bonds outstanding with an average size of USD10m equiv.

  • Only 3 known issuers; Ho Chi Minh City, Hanoi and Dong Nai Province, tightly controlled by central government

  • Ceiling rates defined by MOF (ca 20-30bps over govvies)


Financial management

CORPORATE BONDS

  • Corporate bonds market has grown rapidly in 2009 due to improvement in legal framework

    •Approximately 70-80 corporate bonds totaling ca USD 3.5bn equiv outstanding.

    •Credit culture will take some time to develop onshore.

    -No domestic rating service

    -Only some banks and the government itself have public international ratings at this time


Financial management

CORPORATE BONDS (cont)

  • •Mostly vanilla structures but also some subordinated, callable and pseudo-convertibles have been issued.


Financial management

VIETNAM’S INTERN’L DEBT

•Vietnam has some 23 billion dollars in external debt but only a fraction is tradable commercial debt.

•By far the most liquid bond is the 6 7/8% Intern’l USD 750 million bond.


Financial management

VIETNAM’S WAY FORWARD

•Vision: The Government is for the capital market to reach 50% of GDP in 2910 and70% in 2020.

•Macro-fundamentals provides good base: GDP growth average 7.5% last 20 years, GDP growth for 2009 at 5.2%, 2010 targeted 6.5%, Inflation less than 7%; Funding needs for cape investment is both in public and private sector

•Structural improvements:

+ Additions to existing framework to enhance transparency, predictability, accounting and audit requirements;

+ Market infrastructure reforms (support from ADB, WB …) in primary and secondary trading (dedicated bond trading platform), depository, settlement; liquidity (buy-back program).

+ Initiative to set up local rating services.


Financial management

VIETNAM’S WAY FORWARD (cont)

•Setting up of a new Debt Management and External Finance Department under MOF: centralized Debt Management House under the Public Debt Law with clear roles and responsibility and dynamic risk management.

•Reaffirm commitment to welcome investors:

+ Measures to encourages foreign investors and domestic institutional investor base (pension funds, life insurance firms);

+Constructive dialogue with SRO – Vietnam Bond Association. 1stInitiatives includes Market Conventions; Repos market development.

•Promoting regional initiatives such as ABMI;

•Welcome additional technical assistance.


Thank you

Thank you


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