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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

Annuity Commodity



ID: MA0N0216

  • 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.


  • 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)


  • 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.


  • 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


  • 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)


  • 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


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


• 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.


• 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.


• 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.