Financial Management

Name: NGUYEN THI THIEN TAM (阮氏善心 )

ID: MA0N0216

VIETNAM BOND MARKET

Annuity Commodity

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. > 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.

A YOUNG AND GROWING MARKET (cont)

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

THE MARKET

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)

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.

GOVERNMENT BONDS

Source: DC, indicative, as end of August 2009

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 on HNX.Ceiling rates are defined by MOF

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)

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

• Mostly vanilla structures but also some subordinated, callable and pseudo-convertibles have been issued.

CORPORATE BONDS (cont)

• 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.

VIETNAM’S INTERN’L DEBT

VIETNAM’S WAY FORWARD

• Vision: The Government is for the capital market to reach 50% of

GDP in 2910 and 70% 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.

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. 1st Initiatives includes Market Conventions; Repos market development.• Promoting regional initiatives such as ABMI;• Welcome additional technical assistance.

Thank you