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Financial Management

Financial Management. Annuity Commodity. VIETNAM BOND MARKET. Name: NGUYEN THI THIEN TAM ( 阮氏善心 ) ID: MA0N0216. A YOUNG AND GROWING MARKET. The Vietnam bond market development was boosted when Vietnam entered WTO in 2006. Total market capitalization is now at 15% of GDP.

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Financial Management

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  1. Financial Management Annuity Commodity VIETNAMBOND MARKET Name: NGUYEN THI THIEN TAM (阮氏善心) ID: MA0N0216

  2. A YOUNG AND GROWING MARKET • The Vietnam bond market development was boosted when Vietnam entered WTO in 2006. Total market capitalization is now at15% of GDP. • > 500 government bonds outstanding on some USD 12 billion • After 2008 foreign exodus the market today is predominantly Vietnamese with a handful of big players. In the absence of mutual funds and pension funds, banks dare key players.

  3. A YOUNG AND GROWING MARKET (cont)

  4. THE MARKET • Issuers • Government bonds: Issued by the State Treasury and authorized issuers such as Vietnam Development Bank (policy bank) • Municipal bonds: issued by city municipalities and provincial governments. • Corporate bonds: issued by SOE’s and private enterprises • Investors • Domestic investor base still small. Ability to absorb supply and demand shocks limited • Off-shore investors still limited (no limitation on foreign holdings of bonds)

  5. THE MARKET (cont) • Product range ● Mostly plain vanilla fixed coupon bonds ● Pseudo floaters fixed with 12m average deposit rate quoted by 4 big SOCB’s. ● Callable tier 2, convertibles although mostly with mandatory conversion. • Secondary market although on the increase, still thin ● Bond market tend to be very domestic ● At times >100 bps diff between public sources and the market. ● No surprise discrepancy tend to get worse during period of big movements.

  6. GOVERNMENT BONDS • Government bonds here are State Treasury bonds and VDB (Vietnam Development Bank). • Issued institutional debt since 2000. Steady levels of 8.3-8.6% prior WTO. • Approximately 500 government bonds outstanding as of August 2009 with an average size of <USD20m equiv. Listed onHNX. • Ceiling rates are defined by MOF Source: DC, indicative, as end of August 2009

  7. MUNICIPAL BONDS • Approximately 65 Municipal bonds outstanding with an average size of USD10m equiv. • Only 3 known issuers; Ho Chi Minh City, Hanoi and Dong Nai Province, tightly controlled by central government • Ceiling rates defined by MOF (ca 20-30bps over govvies)

  8. CORPORATE BONDS • Corporate bonds market has grown rapidly in 2009 due to improvement in legal framework • Approximately 70-80 corporate bonds totaling ca USD 3.5bn equiv outstanding. • Credit culture will take some time to develop onshore. - No domestic rating service - Only some banks and the government itself have public international ratings at this time

  9. CORPORATE BONDS (cont) • • Mostly vanilla structures but also some subordinated, callable and pseudo-convertibles have been issued.

  10. VIETNAM’S INTERN’L DEBT • Vietnam has some 23 billion dollars in external debt but only a fraction is tradable commercial debt. • By far the most liquid bond is the 6 7/8% Intern’l USD 750 million bond.

  11. VIETNAM’S WAY FORWARD • Vision: The Government is for the capital market to reach 50% of GDP in 2910 and70% in 2020. • Macro-fundamentals provides good base: GDP growth average 7.5% last 20 years, GDP growth for 2009 at 5.2%, 2010 targeted 6.5%, Inflation less than 7%; Funding needs for cape investment is both in public and private sector • Structural improvements: + Additions to existing framework to enhance transparency, predictability, accounting and audit requirements; + Market infrastructure reforms (support from ADB, WB …) in primary and secondary trading (dedicated bond trading platform), depository, settlement; liquidity (buy-back program). + Initiative to set up local rating services.

  12. VIETNAM’S WAY FORWARD (cont) • Setting up of a new Debt Management and External Finance Department under MOF: centralized Debt Management House under the Public Debt Law with clear roles and responsibility and dynamic risk management. • Reaffirm commitment to welcome investors: + Measures to encourages foreign investors and domestic institutional investor base (pension funds, life insurance firms); +Constructive dialogue with SRO – Vietnam Bond Association. 1stInitiatives includes Market Conventions; Repos market development. • Promoting regional initiatives such as ABMI; • Welcome additional technical assistance.

  13. Thank you

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