Large banks focus on corporate bonds

The total value of corporate bonds sold during the first six months of this year has reached 15 trillion VND (707.5 million USD), equivalent to 88 percent of last year’s total, according to a report from the Bank for Investment and Development of Vietnam (BIDV). Property developer VIDP Group issued 7.6 trillion VND (358.4 million USD) in corporate bonds, mineral giant Vinacomin raised 2.5 trillion VND (117.9 million USD) and Ho Chi Minh City Infrastructure Investment (CII) issued 1 trillion VND (47.1 million USD) worth of bonds. The BIDV report recorded small scale issuance of under 100 billion VND (4.7 million USD) from other companies. “Most of the bonds belonged to real estate firms,” the report said. Corporate bonds were favoured by commercial banks. BIDV and Techcombank bought 500 billion VND (23.8 million USD) and 3 trillion VND (141.5 million USD) worth of bonds in VIDP Group, while all the bonds issued by CII, totalling 1 trillion VND (47.6 million USD) were sold to Vietcombank (VCB). ‘Attractive yields have brought banks with large cash reserves to corporate bonds,” the report said. “Despite the gloomy economic situation that made it more difficult for bond issuance, large corporations are still alluring to investors.” The supply of corporate bonds is expected to continue to rise as companies take advantage of low interest rates to raise capital. “Along with increasing supply, demand will be large, especially for bonds from reputable businesses,” the report said. Bond yields for three- to five-year terms range from 13-15 percent. Meanwhile, Government bonds were less attractive, according to Viet Dragon Securities Co. Government bonds during the first six months yielded about 6-9 percent. Declining yields discouraged investors, especially banks. In June and the beginning of this month, foreign investors sold Government bonds with a net value of 7.2 trillion VND (339.6 million USD).VNA