BondXpress August: Commercial banks: Still the main driving force for the corporate bond market

The corporate bond market continued to show commercial banks' significant role in supply and demand. Accelerated credit growth since June signaled a gradual recovery in capital absorption. This will likely encourage banks, as the largest investor group in the corporate bond market, to diversify their investment channels into corporate bonds, revitalizing the market. Simultaneously, banks have been the most active participants in both primary and secondary corporate bond markets.

The corporate bond market continued to show commercial banks' significant role in supply and demand. Accelerated credit growth since June signaled a gradual recovery in capital absorption. This will likely encourage banks, as the largest investor group in the corporate bond market, to diversify their investment channels into corporate bonds, revitalizing the market. Simultaneously, banks have been the most active participants in both primary and secondary corporate bond markets.  

Key highlights from the report include:  

Credit Growth: The State Bank's warning to reallocate credit growth quota among banks has contributed to accelerating credit growth since June. Improved capital absorption would stir up demand for commercial banks to invest in corporate bonds in the coming time. 

Pressure on Floating Coupon Interest Rates: State-owned banks (Big 4) have yet to increase their 12-month interest rates, so floating coupon rates on corporate bonds have not been affected for the time being but are still under upward pressure in the future. 

Real Estate Credit Quality: Real estate credit quality is expected to improve in the future thanks to the enactment of several important laws: the 2024 Credit Institutions Law aims to reduce concentrated risks arising from cross-ownership and concentrated lending as directed by controlling shareholders. Meanwhile, the 2023 Real Estate Business Law opens up opportunities for more types of real estate businesses to participate in the market but imposes stricter requirements on corporate finance. 

Exchange Rate Pressure Eases: A declining exchange rate environment would encourage businesses to access foreign loans and issue international bonds, although the exchange rate may still fluctuate upwards in the future. 

For the first seven months of 2024, total issuance reached VND 178.5 trillion, up 57% year-on-year, although the value of non-bank bonds decreased by 32%. 

For the full BondXpress May report, please refer to THIS LINK.  

About FiinRatings  

FiinRatings, a member of FiinGroup and a technical cooperation partner of S&P Global Ratings, is a licensed credit rating agency in Vietnam. FiinRatings provides credit ratings and related services to issuers, credit institutions, and investors in the Vietnamese credit market. FiinRatings is also the first authorized green bond verifier in Vietnam, adhering to the international green bond standards of the Climate Bonds Initiative... For more information, please visit https://fiinratings.vn/    

FiinGroup is Vietnam's leading provider of financial data analytics platforms, business information services, and industry research. FiinGroup provides services to domestic and foreign investors in the capital market and businesses to support their business development in Vietnam. For more information, please visit https://www.fiingroup.vn 

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