The Bitexco Financial Tower, a skyscraper in Ho Chi Minh City. Source: Wikimedia
The largest listed Vietnamese property developer is backing the dormant bond market, selling three times as much in bonds during the last quarter as all the nation’s firms combined in last year’s corresponding quarter, as the nation looks to boost exports to the United Arab Emirates.
The 3 trillion dong (US$134 million) raised by Vingroup Joint Stock Co compared with less than 1 trillion dong of total issuance for January to March last year, according to data from the state-owned Bank for Investment and Development of Vietnam.
The corporate note market made up 0.7 per cent of GDP in the final quarter of last year, compared with 6.1 per cent in the Philippines and 19 per cent in Thailand, according to the Asian Development Bank (ADB).
“Vietnam needs a lot of long-term investment, such as infrastructure,” said Donghyun Park of ADB in Manila. “It’s absolutely critical for its economic development and that’s where bond markets come in.”
Debt sales boost an economy with the Asia Commercial Bank preparing a 2 trillion dong sale and industrial park operator Kinh Bac City Development Share Holding planning to raise as much as 2 trillion dong. GDP is predicted to grow by more than 6 per cent for a second year, market observers estimate, the highest Asean rate, after disbursed foreign-direct investment reached a record US$14.5 billion last year.
“With the economy growing, the demand for credit by businesses is strong,” Alan Pham of VinaCapital Group in Ho Chi Minh City said. “Enterprises see an opportunity to enter the corporate bond market where they can get funds for three to five years instead of bank loans, which tend to be short term.”
Although the economy was still dominated by state-owned lenders, the growth rate was creating a “conducive environment” for more corporate bond sales, said Park from ADB.
A corporate debt-trading platform that Hanoi Stock Exchange plans to start early next year should improve liquidity and encourage more companies to invest in the debt market, said Dang Tran Hai Dang, the deputy manager of research at VietinBank Securities JSC in Hanoi. The platform is aimed at boosting the size of the market, said Nguyen Thi Hoang Lan, deputy general director of the bourse in Hanoi.
It is predicted that trade with the United Arab Emirates with Vietnam will expand this year as visitors to the Gulf states increase. Trade is predicted to increase by as much as 15 per cent to US$7 billion this year, estimated Pham Binh Dam, Vietnam’s ambassador to the UAE.
“The trade between Vietnam and the UAE has been growing very strongly in the past five years,” Dam told Abu Dhabi’s National newspaper at the start of the Vietnam Week trade events in Dubai.
It includes displays by 20 agricultural and food suppliers.
About US$5.7 billion of the UAE’s US$6.1 billion trade with Vietnam last year came through Vietnamese exports, including a sizeable amount of Samsung products and consumer goods.
Pham Trung Nghia, Vietnam’s trade office chief in Dubai, said the UAE imported about US$250 million of food from Vietnam, including US$100m of pepper, US$30m of rice and US$25m of coffee.
In 2013, 500 visit visas were issued to Vietnamese nationals, rising to 1,200 in 2014 and 25,000 last year.
“On the one hand, people in Vietnam know more about Dubai because of some top-rated electronic newspapers that run articles about Dubai almost every two or three days,” said Dam. “On the other hand, the disposable income that the Vietnamese people have for travelling [has risen].”