As Vietnamese regulators continue to open the door to foreign financial institutions, Vietnamese issuers such as property companies have been increasingly tapping the capital market directly over the past few years.
With growing understanding of international practices, issuers such as Vietnam Electricity Corporation are looking to tap the offshore capital market. “The offshore capital market is something we are looking forward to,“ says Nguyen Xuan Nam, financial director of Vietnam Electricity Corporation. “Cost is a more important factor to us.”
US dollar bond issuance internationally requires a rating from rating agencies. While Vietnamese issuers are not yet used to the international rating practice, industry experts believe that obtaining a credit rating is beneficial to issuers especially first-time issuers. “Ratings can give independent opinions and transparency to investors,” says Vicky Melbourne, head of South and Southeast Asia industrials at Fitch Ratings.
Currently, although the domestic capital market size is 110% of Vietnam GDP, bank loans are still the preferred source of financing for most issuers with short-term working capital need.
“Corporates from different industries may face different level of difficulties in obtaining financing. Property companies are easy. SMEs usually go to commercial banks,” says Doan Linh Huong, deputy head of investment banking at MB Securities, at a Vietnam forum in Hanoi held by The Asset in association with Fitch Ratings.
On the other hand, investors who have no exposure to Vietnam corporates have shown interest in investing in Vietnamese issuers. “Investors are definitely happy to take Vietnam issuers for diversification purposes,” says Hemant Lodha, managing director, HSBC.
On the domestic side, the Vietnamese corporate bond market has seen a three-fold growth in value outstanding since 2015 as of the end of 2018, according to MB Securities. The government has also recently issued a regulation encouraging corporate bond issuance.