Government bonds on auction

The Vietnam gov’t is set to auction 300 billion VND (18.8mio US$) in bonds February 26 at the Hanoi Securities Trading Center (HASTC), with funds to assist socio-economic development. The finance ministry forecast that government backed bonds would lure about 60-70 trillion VND (3.7- 4.3mio US$) annually in the near future.

The five-year bonds bear a face value of 100,000 VND and will be issued the State Treasury on February 28 and listed in the Hanoi bourse.

The government has successfully raised 500 billion VND (31mio US$) through a bond issue on also HASTC on February 5.

The five-year bonds, oversubscribed by nearly five times, have a coupon of 7.62% per annum.
The state treasury-issued report said Hanoi and Ho Chi Minh City had generated about 2.5 trillion VND (US$156 million), bringing municipal outstanding bond debt to 10 trillion VND($625 million) last year.

The development of a bond market has been viewed as an effective way to tap capital sources and also an important step in controlling inflation and currency fluctuation, the treasury said.
Foreign financiers said the debt market was still small compared to the regional exchanges in the Philippines, Malaysia and Singapore though the volume of government bonds has been increased since 2000.

They added that reforms were necessary to assist bond traders in accessing markets, tackling risks and controlling expenses.

The government should not be involved in setting price ceilings or interest rates, which limits the market’s competitiveness in the region.

The Ministry of Finance said recently it was restructuring the bond market to boost liquidity and transparency to attract investors and ensure funds for an economy growing at 8% a year.
Too many types of government bonds were now listed on the stock market and their small, fragmented nature limited the market’s development.

Starting this year, government bond issues would be larger and be traded on the Hanoi over-the-counter market.

The government planned to raise 500mio US$ to 1 billion US$ on the global bond market in the first quarter of this year, more than a year after raising 750mio US$ in its first sovereign bond issue.

The proceeds of the bond, with a maturity of 10 or 20 years, would be allocated to several companies, including Electricity of Vietnam, which too plans to issue global corporate bonds to raise 150mio US$.

Source: Thanh Nien