Thursday , July 29 2021

Income from corporate bonds of 8-10% / year will be a "magic door" for the real estate business and the banks



The State Bank has just announced the Circular to replace circular text 36/2014 / TT-NHNN, which changes the legislation on limits and safety ratios in the banking sector. Accordingly, the roadmap for bringing the maximum ratio of short-term medium- and long-term loans to 30% from July 2021 (plan 1) or July 2022 (plan 2). This ratio is currently set at a maximum of 40% from 1 January 2019 compared to 45% from 2018.

The project also corrected the risk ratio of some mandatory items in Annex 2 related to the real estate sector, increasing the capital reserves for loans in the real estate sector. According to MBS Securities Company, the State Bank has expressed its prudent operational attitude to preserve the safety and stability of the system before the strong growth of the real estate market in 2017 and 2018.

However, if you look at the corporate bond market, perhaps the real estate business will not be too worried if the capital of the banks narrows.

According to the VDSC report, the size of the issued bonds doubled only in 2018. Data from the State Securities Commission show that the volume of successfully issued bonds in 2018 is 224,000 billion. Donna. , which is 94.5% more than the previous year. The market debt in 2018 is 474 500 billion Leva, which is 53% more than the same period in 2017, reaching 8.6% of GDP.

Revenue Corporate bonds of 8-10% / year will be a "magic door" for real estate and banking enterprises - Picture 1.

Scale for issuing corporate bonds

Businesses that have successfully issued bonds in recent years are mainly in the real estate, banking and financial services sectors. The policy to limit the flow of credit capital in the real estate sector, especially in real estate developers, requires businesses to be more active in the financial market. The purpose of using the capital is mainly to develop real estate projects with a term of about 2 years. Meanwhile, banks mobilize capital through the bond market to increase Tier 2 capital and supplement long-term capital.

Revenue from corporate bonds of 8-10% / year will be a "magic door" for real estate and bank businesses - Picture 2.

Structure of the issuance of corporate bonds

According to VDSC statistics, the interest rate on the successful issuance of bank bonds is around 7.5% per annum; securities companies about 8-10.5% / year, real estate enterprises about 10% / year. With the exception of banks, the period of issuance of enterprises is mostly under 3 years.

According to Rong Viet's statistics, in the 30 largest corporate bond issuers last year, totaling about $ 4.13 billion, of which Vinhomes and Vingroup issued more than 22,000 billion VND 11,100 billion, Vietinbank issued 8,200 billion, ACB has issued 6,800 billion …

According to VDSC's estimate, the VGBs yield level has fallen sharply and is stable at around 8% -10% per annum for ordinary bonds. Consequently, the base of the base bond yield created a significant difference with deposit and credit interests in the banking system. According to the State Bank, the interest rate on deposits over a 12-month period is around 6.6% -7.3% / year and the interest rate for industrial and business loans is usually 9% -11% / year.

Revenues from corporate bonds of 8-10% / year will be a "magic door" for real estate and banking companies - Picture 3.

With reputable large businesses, instead of wholesalers for banks, many companies are now actively issuing retail bonds to investors. With the psychology of people who have idle money wanting to be safe but still wanting to enjoy higher interest rates from banks, the choice of investing in corporate bonds is not a bad choice.

On the market, in addition to the banking sector, it is possible to issue corporate bonds with yields of around 7.5% per annum, with the market taking into account the growing involvement of large international institutional institutions acting as insurance insurers. Typical cases should be mentioned as MWG, CII, MSN, etc. with dividends below 7%.

According to VDSC, the IFC has proposed a program to help Vietnamese companies issue local currency bonds on the international market under the name of Bong Sen. This will help diversify capital resources for businesses in the context of stable credit growth around 14% per year. However, the lack of a credit rating organization remains an impediment to Vietnamese businesses as the world capital market approaches.

Revenues from corporate bonds of 8-10% / year will be a "magic door" for real estate and banking companies - Picture 4.

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