Issuing international bonds: good idea, but not easy
06-SEP-2008 Intellasia | Dien Dan Doanh Nghiep | Vietnamnet
Sep 6, 2008 - 7:00:00 AM
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Issuing corporate bonds in the international market proves to be a good way to mobilise capital. However, Vietnamese corporations still need to do a lot of things to reach their goals.
The issuance of US$750 million worth of 10-year government bonds in New York in 2005 marked the presence of Vietnam's securities for the first time in the international market. The issuance attracted a lot of big international investors, 255 of whom purchased the bonds, while only 150 investors purchased Indonesian government bonds previously. The investors ordered to purchase US$4.5 billion worth of bonds, or six times more than the offered volume.
With the successful issuance, Vietnamese businesses hope that international bonds can also help Vietnamese businesses to mobilise capital.
Since the issuance, a lot of big corporations have been attempting to issue corporate bonds on the international market, while the Ministry of Finance (MoF) has confirmed its readiness to support bond issuances.
The Electricity of Vietnam (EVN) has received the government's approval in principle on its plan to issue US$800 million worth of corporate bonds.
In early June 2007, MoF asked the government to approve the resolution on issuing US$1 billion worth of 15-20 year bonds on the international market, which would help raise funds for PetroVietnam, Vinalines, Song Da Corp and Lilama.
Meanwhile, the Ministry of Planning and Investment said that it is necessary to mobilise 554 trillion in capital, or 41.5% of GDP, to obtain the economic growth rate of over 9%. The state budget can only provide 17.5% of the said capital, while the other 83.5% of capital must be fed by other sources, including international bonds.
The road is still tough
Experts say that before Vietnam issues international bonds, it needs to develop its domestic bond market. Foreign investors are still injecting money in Vietnamese bonds with transactions on the domestic market.
In 2007, Vietnam's bond market remained satisfactory despite a lot of difficulties with the scale up from 11% of GDP in 2006 to 13% of GDP in 2007. Foreign investors purchased 50% of the volume of bonds issued.
Experts say a lot of difficulties are still floating around which could hinder bond issuances. The plan to issue US$1 billion worth of government bonds put forward in June 2007 has been cancelled. No big corporation has announced new issuance plans.
The cautiousness of corporations in issuing bonds may originate from the difficulties of the global economy. Meanwhile, Vietnamese corporations need to show their credit ratings, financial capability and fulfil complicated procedures.
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