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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Name: NGUYEN THI THIEN TAM (阮氏善心)
• 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
• 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)
● 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.
● 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.
Source: DC, indicative, as end of August 2009
• 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
• 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.