Four dangers when investing within the bond market
Based on knowledge from the Ministry of Finance, within the first 6 months of 2021, the amount of particular person company bonds (CBOs) was 168,702 billion dong, up 3.2% over the identical interval in 2020. Issued quantity the general public is VND 15,375 billion, equal to 50.3% of the issuance quantity of 2020, accounting for 8.3% of the overall quantity of company bonds issued. These figures present that there’s an preliminary shift from non-public issuance to public issuance. This can be a good sign within the company bond market.
Concerning traders, securities corporations are the primary traders within the major market, accounting for 44.4% of the overall issuance quantity, whereas credit score establishments account for 25% of the overall issuance quantity. The proportion of particular person traders who’re skilled securities traders who purchase company bonds individually on the first market accounted for five.7% of the issuance quantity, a pointy lower in comparison with the proportion of particular person traders in 2020 (which was 12 ,68%).
Within the first 6 months of 2021, the amount of particular person company bonds (Company bonds) was 168,702 billion VND, up 3.2% over the identical interval in 2020. (Art work: KT)
Nevertheless, Mr. Nguyen Quang Thuan, Chairman of the Board of Administrators of Fiin Scores, mentioned that there are 4 foremost dangers when investing within the bond market that traders must determine.
The primary is credit score danger, the bond issuer just isn’t capable of pay periodic curiosity or pay the principal on time.
The second is liquidity danger, traders can not instantly promote bonds when there’s a want for money, or can not promote bonds on the anticipated value or must pay many prices to promote bonds. promissory word. The common each day liquidity of listed bonds is VND 131.Three billion, equal to 0.75% of the issued worth on HOSE of VND 17,530 billion. The liquidity of this market remains to be modest with the turnover ratio of Vietnam’s company bond market at solely 0.08 instances and is at a really small degree in comparison with different nations within the area.
The third danger is rate of interest pricing. The danger-adjusted rate of interest valuation just isn’t cheap, resulting in excessive rates of interest however massive dangers and disproportionate rates of interest.
Lastly, different dangers embrace: danger of acquisition, reinvestment, inflation, rates of interest, financial instability, mergers and acquisitions, disasters or pandemics…
“With the intention to keep away from dangers, traders want to make use of skilled recommendation, self-assess dangers if attainable, diversify funding channels with the identical traits as bond funds, pension funds… Issuing bonds If executed effectively, it can turn out to be a “salvation” channel for Vietnam’s monetary market, “mentioned Nguyen Quang Thuan.
Don’t make a revenue in any respect prices
Based on Mr. Do Ngoc Quynh, Basic Secretary of the Vietnam Bond Market Affiliation, there are various funding alternatives comparable to shopping for bonds, saving cash, shopping for gold, shopping for actual property, and bonds. … To make choices, traders should perceive themselves, will need to have an image of their private monetary scenario to keep away from placing all their eggs in a single basket. As a result of, there isn’t any funding channel, any funding product has solely revenue with out danger.
Mr. Do Ngoc Quynh, Basic Secretary of Vietnam Bond Market Affiliation
“Normally, consulting corporations will assist traders unfold dangers into many various funding channels. When traders have accepted the danger to place part of their property into the bond market, then they may proceed to debate the story of selecting bonds to go well with danger urge for food, “mentioned Quynh. .
Additionally in response to Mr. Quynh, for those who solely put it by way of danger, it’s simple to seek out secure bonds. Wherein, traders can select companies which have been respected, branded, working available in the market for a very long time. Concerning the issuance methodology, it’s advisable to decide on bonds issued to the general public, even with a credit standing, the higher.
“Selecting low-risk bonds may be very simple. Selecting bonds which can be appropriate for traders’ danger urge for food, monetary situations, and rate of interest expectations is troublesome,” mentioned Mr. Do Ngoc Quynh.
Dr. Nguyen Tri Hieu, a banking and finance professional, mentioned that alternatives and dangers are two elements that at all times go hand in hand. Accordingly, although the regulator has restricted market members, ie restricted demand, however within the context of elevated dangers as a result of epidemic, excessive bond rates of interest are nonetheless effectively acquired by traders.
“Bonds are nonetheless issued because of rates of interest, whereas tens of hundreds of companies are compelled to depart the market. If from now till the tip of the 12 months, the Covid-19 epidemic scenario has not been fully managed, this quantity might attain 100,000 companies. And nobody is certain that, amongst them, there are companies which have issued bonds. The danger of “debt bomb” bursting has progressively turn out to be obvious, particularly in actual property,” warned Mr. Hieu.
Due to this fact, Dr. Nguyen Tri Hieu famous, particular person traders shopping for company bonds not solely settle within the current by the need for top rates of interest, however should discover a method out for the approaching years.
“In the course of the interval when the financial system is paralyzed by the epidemic, this isn’t the time for particular person traders to growth and make income in any respect prices, however the time of choice and warning,” mentioned Dr. Nguyen Tri Hieu recommends.