Vietnam's Corporate Bond Market Grows 4.2%

10:25:26 AM | 12/2/2019

Vietnam's local currency bond market expanded in the third quarter of 2019. By the end of September, Vietnam had US$55.1 billion in outstanding bonds, 3.4% higher than the previous quarter and 1.9% higher than the year-ago period in terms of local currency value, according to the latest issue of the Asian Development Bank’s (ADB) Asia Bond Monitor.

According to the report, this expansion was due mainly to a 4% quarter-on-quarter growth in Government bonds to US$51.0 billion as the State Bank of Vietnam (SBV) increased issuance of central bank bills.

The overall growth of the country’s local currency bond market was slightly tempered by a 2.8% contraction on-quarter in the corporate bond market to US$5 billion. The corporate bond market still posted growth of 4.2% year-on-year.

In September 2019, ADB also commented that Vietnam's local currency bond market continued to expand 2.6% on-quarter in the second quarter of 2019 in terms of local currency value after growing by 0.7% in the first quarter to US$52.9 billion. This modest growth was largely due to a 3.2% expansion in the G-bond market to US$48 billion as the SBV issued treasury bonds and state bank bills.

Also according to the ADB report, emerging East Asian local currency bond market posted steady growth during the third quarter of 2019 despite persistent trade uncertainties and a global economic downturn.

Emerging East Asia comprises China, Hong Kong (China), Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

Local currency bonds outstanding in emerging East Asia reached US$15.2 trillion at the end of September, 3.1% higher than at the end of June. Local currency government bonds outstanding totaled US$9.4 trillion, accounting for 61.8% of the total, while the stock of corporate bonds was US$5.8 trillion. A total of US$1.5 trillion in local currency bonds were issued in the third quarter, marginally 0.9% higher the previous quarter.

China remained emerging East Asia’s largest bond market at US$11.5 trillion, accounting for 75.4% of emerging East Asia’s outstanding bonds. Indonesia had the fastest-growing local currency bond market in the region during the third quarter, boosted by large issuance rounds of treasury bills and bonds.

This report has a special theme chapter which examines the relationship between bond market development and the risk-taking behavior of banks. The analysis finds that well-developed bond markets reduce the overall risk of banks and improve their liquidity positions. This suggests bond market development can contribute to the soundness of the banking system.

An annual liquidity survey in the report shows increased liquidity and trading volumes in most regional local currency bond markets in 2019 versus 2018. It also highlights the need for a well-functioning hedging mechanism and diversified investor base for both government and corporate bonds.

Quynh Chi