Vietnam Reaps Marvellous Success in Sovereign Bond Issue Abroad

On November 2, 2005, the Vietnamese Ministry of Finance organized a meeting to declare the results of the country’s first-ever sovereign bond issue worth US$750 million abroad. Deputy Finance Minister Le Thi Bang Tam said this bond issue is in line with the Rule 144A/Regulation S, the transaction currency is US dollars. The bonds were transacted in the Singaporean stock exchange. According to Ms Tam, the Vietnamese government’s selection of the Singaporean stock exchange for the issue of its first sovereign bonds plays an important part in carrying out the Initiative of the Vietnamese-Singaporean governments to link the two economies. The Singaporean stock exchange is one of the world’s top stock markets easily accessible to international investors. Tam said the number of investors registering for the acquisition of the Vietnamese sovereign bonds stands at a record high in the capital market in recent years.

 

255 large investors registered to buy Vietnamese government bonds, much higher than those registered for Indonesian government bonds hosted in October 2005. The total deposits reached US$4.5 billion, six higher than the offering of US$750 million. Tam said Asian investors hold 38 per cent, European investors 32 per cent and American investors 30 per cent. In the structural division, financial investment funds hold 51 per cent, banks 25 per cent, insurance companies 17 per cent and other investment organisations 7 per cent. The interest rate of the Vietnamese sovereign bond is lower than other regional countries with the same credit rating level. The 10-year bond interest rate is 7.125 per cent a year, lower than initially planned 7.25-7.5 per cent. Tam said this rate is much lower than the 10-year sovereign bond interest rate of the Philippines at 8.1 per cent a year, of Indonesia at 7.8 per cent per year.

 

The overseas bond issue with an attractive interest rate is aimed at mobilising a large sum of capital in a short time. The raised money is given to the Vietnam Shipbuilding Industry Corp. (Vinashin) to realise its approved projects. This issue also reflects Vietnam’s implementation of commitments to reform its economy and paves the way for further issues.