Vietnam’s local currency bond market reached $51 billion USD in 2018, increasing 9.3 per cent compared to that of 2017, according to the ADB’s latest issue of the quarterly Asia Bond Monitor.
The positive result is mainly due to the 29.4 per cent - growth of private enterprise bond market last year that reached $4 billion.
However, the monitored corporate bonds accounted for only nearly 10 per cent of the total value of bonds circulated in Vietnam. The rest was covered by state-owned enterprises and state treasury bonds.
Last year, large Vietnamese private enterprises such as Vingroup, Masan Group and Novaland issued bonds worth tens of trillions of dong to raise capital and most of these deals were carried out by Techcombank Securities.
Many banks in Vietnam also mobilize capital in the form of bonds to meet the adjustments of the State Bank on mobilization and lending rates.
Vietnam's bond market size is quite small compared to regional markets.
ADB’s report shows that at the end of 2018, there were $13.1 trillion in local currency bonds outstanding in emerging East Asia that comprises China, Hong Kong, Indonesia, the South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The figure is 2.4 per cent more than at the end of September 2018 and 11.9 per cent more than at the end of 2017.
It stated that Investor sentiment toward emerging East Asia’s local currency bond markets has improved but there are persistent concerns about financial stability in the region, including ongoing trade conflicts.
According to ADB chief economist Yasuyuki Sawada, risks to financial stability in emerging East Asia have receded somewhat recently. However, some uncertainties persist, notably from the unresolved trade conflict between China and the U.S, a potentially disorderly exit of the UK from the European Union and slowdown of global growth momentum.
“The rapid buildup in private debt during the past decade could also damage economies and financial stability in the region,” he emphasized.
In a special section, the report noted the potential for the development of markets for green bonds, whose proceeds are used for environment or climate financing. Issuance in the region between 2016 and 2018 has been led by bonds denominated in Chinese yuan, which made up 46 per cent of emerging market green bonds issued.
Another section noted that debt tends to be more expensive in markets with greater vulnerability to climate change. Higher debt costs mean projects to mitigate the physical impacts of climate change are also more costly.