Despite many risks, real estate bond continues to bloom in 2020

15-Jan-2020 Intellasia | Tri Thuc Tre | 6:02 AM Print This Post

The analysis and consulting centre for individual customers of SSI Securities Corporation citing according to statistics published from Hanoi Stock Exchange (HNX) and businesses, showed that in 2019, 211 enterprises were offering a total of 300.588 trillion dong of bonds, divided into 807 issues, of which 12 were unsuccessful. The total number of warrants issued for the whole year was 280.141 trillion dong, equivalent to 93.2 percent of the offering value and increased by 25 percent compared to 2018.

Real estate bonds accounted for nearly 40 percent of total bonds issued in the market

The total number of real estate bonds issued in 2019 was 106.5 trillion dong, accounting for 38 percent of the overall market issuance and lower than the banking group. In which, multi-industry organisations issued some, but the purpose of using capital was to invest in real estate, so they were still classified in this group. The average tenor of this group was 3.7 years, and the average interest rate was 10.3 percent per year, which was the highest in the market if excluding the issuance batch of Hong Hoang Investment and Trading Joint Stock Company.

Individual investors bought nearly 11 trillion dong of real estate bonds. The rest was institutional investors. In which, commercial banks bought 19.1 trillion dong, securities companies bought 4.4 trillion dong, foreign organisations bought 1.66 trillion dong of bonds of KDH, PDR, DXG. The remainder was generally listed as a ‘domestic organisation’ or lacked specific information.

The highest interest rate of real estate bonds in the market, peaking at more than 20%

Calculating the weighted average value in 2019, the average bond interest rate was 8.8 percent per year, and the average bond term was 4.04 years. Interest rates and tenors both increased in the last quarter, mainly due to raised commercial banks issuing long-term bonds and higher interest rates.

There were 51.3 percent of bonds issued with fixed interest rates, focusing mainly on two to three-year bonds of commercial banks, paying interest annually. The remaining 48.7 percent of bonds had floating interest rates, mostly bonds of real estate businesses and bank bonds with terms of five years or more.

The group of bank bonds had the lowest average interest rate (7.04 percent per year), the group with the highest average interest rate was real estate (10.3 percent per year). The group of other businesses with average interest rates as high as the real estate group was mainly due to the issuance of 1.402 trillion dong of five-year bonds with a 20 percent interest rate of Hong Hoang Investment and Trading Joint Stock Company. If excluding this amount, the average interest rate of the group of other businesses was only 9.86 percent per year.

In addition to those mentioned above unusually high interest rates, there were three issuance slots of Phat Dat Real Estate (PDR) and two issuance slots of Housing Development and Investment One Member Limited Company with interest rates of over 13 percent per year in real estate businesses. Star Beach Real Estate Business Investment Company offered 150 billion dong of 24-month bonds, with interest rates up to 18 percent per year. Still, neither buyer showed that the market was selective, not just looking at interest rates.

Except for the group of bank bonds, most of the bonds were in the interest rate range of 10 percent to 11 percent per year, which was three percent to four percent higher than the deposit interest rate. This level was equal to the interest rate of medium and long-term loans at nine percent to 10 percent per year (according to information from the State Bank of Vietnam-SBV).

The longest average bond tenor (7.3 years) belonged to the infrastructure development group, energy and mineral enterprises, consistent with the long-term nature of the investment projects that these enterprises carried out. The group that issued the most short-term bonds was securities companies, mostly only for one to two years. Especially, there were two issuance lots with a total value of 104 billion dong of VNDirect Securities Corporation (VNDirect) with a term of up to 10 years.

Real estate bonds might continue to bloom

According to Saigon Securities Incorporation (SSI) analysts, SBV was aiming to reduce credit in the real estate sector by adjusting risk factors to calculate the capital adequacy ratio (CAR) index in Circular 22/2019/TT-NHNN. Thus, the bond channel would be sought by real estate businesses. Real estate bonds would bloom in the next time because of attractive interest rates, short interest payment periods, and high issuance demand.

However, profits always came with risks, so analysts also recommended the need for increased supervision from regulatory agencies to ensure the sustainable development of this market.


Category: Stocks, Vietnam

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