REVIEW
of
FINANCE -
Feb. 2018
41
The assessment shows that although the
initial results are achieved, the size of the market
of small capitals is still small compared to the
potential of the economy, the market size of
other countries in the region and the demand for
capital mobilization of businesses. By the end of
2016, the outstanding debt of the bond market
was equal to 5.27% of GDP, while the size of the
bank credit channel was equal to 116% of GDP.
Outstanding debt in Vietnam’s securities market
is much lower than the average of about 22% of
GDP of other countries in the region, of which
99% of the volume has been issued in individual
form. The size of the market is small, due to
macroeconomic instability; the financial system
and capital mobilization channel are mainly bank
credit channel; the awareness of bond capital
mobilization is limited; investor base is weak;
the legal framework for issuing corporate bond
issuance is limited.
The direction for the development
of corporate bond market
In order to create confidence for investors to
buy bonds, state management agencies should
continue to have regulations to improve the
quality of bonds as well as the transparency of
information, ensuring the assessment to the full
and accurate information for the investors who,
then can use to assess the true nature of the
business, forecast the company’s ability to pay
interest and repay principal. To do this, specific
provisions on the competent financial statement
audit organization, the early establishment of
enterprise credit rating agency are needed; the
provisions on the agents managing securities
assets for bonds, representatives of bondholders
should be instituted, the market makers for
corporate bonds should be formed.
repay insufficient maturities for three consecutive
years will not be entitled to issue bonds to foreign
investors, except for issuance to selected financial
institutions. This is stipulated in the Enterprise
Law but not regulated in Decree 90/2011/ND-CP,
causing concern for both issuers and investors.
Not to mention, there are no legal regulations on
financial institutions
In addition, bond issuers must meet the
condition that the financial statements are
audited. However, there are businesses being in
the process of investment, so business operation
in the previous year has not yet profitable.
These enterprises have investment and feasible
repayment plans and they also need to mobilize
capital to carry out investment activities. Many
large scale businesses that operate effectively,
but there are other payables, although very
small compared to the size of enterprises, for an
objective reasons having been not paid, leading
to the recognition of an outstanding debt; or
some companies operating under the parent-
subsidiary model, the the financial statements of
the parent company are fully accepted, but the
consolidated statements has the exception or
vice versa. Meanwhile, there are exceptions in
the audit reports that do not seriously affect the
nature of business as well as business operations
of the company.
Besides, the regulations on reporting results
of issuance of corporate bond market to the state
management agencies is not clear. According to
the regulations, after 15 days since the completion
of the issue of bonds, enterprises must report to
the Ministry of Finance and disclose information,
however, the time of completion of the issuance
is not clarified that it is when the investor has
transferred the money to buy bonds or the date
of the issuance of bonds.
Increase Stable decrease
Productionvolume
Numberoforders
Numberof
exportorders
Numberofemployment
BUSINESS’ RATINGS OF THE EACH INDICATOR
OF Q1 2018 AND Q4 2017
Source: Review of Finance
2016
2017
Q4
THE RATE OF BUSINESS ONLINE REGISTRATION IS INCREASING
RAPIDLY THANKS TO FAVORABLE POLICIES (%)
Source: Review of Finance
