Vietnam wants to scale up its bond market

VietNamNet Bridge - The current scale of the Vietnamese bond market is only one-third of South Korea’s and one-half of Malaysia’s, while its trading value in the government bond secondary market is equal to Thailand’s, but much lower than South Korea’s and Singapore’s.


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Despite big leaps in recent years, the Vietnamese bond market remains small compared with other regional countries. As of July 2018, the bond market balance had reached 39.9 percent of GDP in 2017, while the figures were 124.6 percent GDP for South Korea, 95 percent for Malaysia and 81.1 percent for Singapore. 

The bond market is considered an important channel that helps mobilize capital for the national economy. However, despite legal solutions, the market still faced big problems until 2015.

A report of the Ministry of Finance (MOF) showed that the government bond market was small in 2014, equal to 13.84 percent of GDP, while 79.7 percent of bonds were held by commercial banks. 

The bond market is considered an important channel that helps mobilize capital for the national economy. However, despite legal solutions, the market still faced big problems until 2015.

In that period, the government mostly issued short-term bonds (less than five years), a factor that affected the stability of public debt.

Meanwhile, in recent years, the market expanded with diverse investors and decreased holding ratios of commercial banks.

According to Phan Thi Thu Hien, director of the MOF’s Banks and Finance Institution Department, by the end of July 2018, the ratio of bonds held by commercial banks had reduced from 79.7 percent in 2014 to 51.1 percent, equal to other regional countries, including Singapore and Malaysia, and lower than China (68 percent) and Thailand (60 percent).

In late 2017, government bond investments accounted for 7.28 percent of the banking system’s total assets, while outstanding loans accounted for 65 percent, or 130 percent of GDP.

The remaining was held by Vietnam Social Insurance, insurance companies (mostly life insurers), Deposit Insurance of Vietnam, foreign investors and other investors.

Analysts noted that some offshore investors have begun showing interest in the Vietnam’s government bond market. 

In 2017, MOF successfully issued VND11 trillion worth of government 20- and 30-year bonds to offshore investors.

Besides traditional bonds with fixed interest rates, MOF developed many other bond products, including flexible payment periods with maturity terms of 5-30 years.

The diversification helped scale up the transaction value in the secondary market to VND9 trillion per trading session in 2017 from VND1-2 trillion in 2011-2013. 

In the first seven months of 2018, the average transaction value reached VND10.4 trillion per trading session.

Hien said the Vietnamese bond market is still small compared with other regional countries because of Vietnam’s low level of economic development, which limits long-term savings of insurance companies and retirement funds.


US$1=VND22,000


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Mai Thanh

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