Vietnam seeks bond market growth after credit crunch

“Those companies in financial trouble are the ones that expanded too much.” Ho Duc Phoc

Vietnam is seeking to expand the nation’s corporate bond market as it grapples with a credit crunch for a real-estate sector hurt by a handful of highly-leveraged companies, according to finance minister Ho Duc Phoc.

The government does not see a wider impact beyond the select firms that have engaged in bad or illegal practices, he told Bloomberg News in Hanoi. It’s working to ease access to capital for property developers given the market rout and enable easier access to funding for years to come.

“Those companies in financial trouble are the ones that expanded too much and beyond their capacity, such as building dozens of projects at the same time and exceeding their financial abilities,” he said.

“Now as the central bank tightens credit limits to fight inflation, these companies are facing liquidity problems and hurting their investors’ confidence.”

By 2030, Vietnam is aiming to grow corporate bond volumes to 25% of gross domestic product from about 11% currently, he added. The outstanding corporate bonds market is worth about 1,200 trillion dong (Us$48.3bil or Rm221bil).

The statements come amid the government’s sweeping regulatory probe on corruption in the corporate bond market that’s landed heavily on Vietnam’s real estate developers.

Property firms are now faced with a funding crunch, along with higher rates and warnings by the central bank against risky real estate loans, sending investors fleeing.

The broad anti-corruption crackdown may also have large implications for one of Southeast Asia’s fastest growing economies, home to some of the largest suppliers of conglomerates like Apple Inc and Samsung Electronics Co.

Vietnam’s corporate bond sales and volumes tumbled this year, with sales through private placements falling 51%.