Individual investors spent tens of trillion VND on buying corporate bonds in the first half of the year

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According to SSI Research data, since the beginning of 2020, individual investors have directly purchased nearly VND 22,700 billion of corporate bonds in the primary market. At the same time, corporate bonds issued by many are also being strongly distributed to individual customers in the secondary market.

Individual investors are actively participating in the corporate bond market

SSI Securities Joint Stock Company (SSI Research) has just released a report on corporate bond market (TPDN).

In the report, SSI Research cited TCBS data, which accounts for 82.4% of the corporate bond market share on the HSX, said it had sold retail to the market to individual investors more than VND 30,000 billion in 2019, increased by 47% compared to 2018.

SSI Research estimates that the amount of corporate bonds that individual investors buy in 2019 on both secondary and primary levels will be about VND 66,000 billion, or 1.4% of the total residential deposit in the banking system.

Although small, the level of participation of individual investors in the corporate bond market is increasing rapidly.

According to SSI Research data, from the beginning of 2020 until now, individual investors have directly purchased nearly VND 22,700 billion of corporate bonds in the primary market, equivalent to 15% of the total issuance, higher than the recent average. 10% of 2019. Corporate bonds issued in the first half of 2020 such as Sovico, Vinfast, Vincommerce, Masan Group are also being strongly distributed to individual customers in the secondary market.

According to SSI Research, the reason why individual investors are actively participating in the market is because they can access corporate bonds more easily through the counters of banks / securities companies, place orders to buy corporate bonds through their securities accounts. This function is even integrated into electronic bank accounts at some banks.

At the same time, the bond batches can be split up to each million dong to suit the investment needs of customers, the investment period is also very flexible thanks to intermediaries arranging transactions or buying back from agents. Storage.

Besides, compared to deposit interest rates, corporate bond yields are from 0.8-1.7% / year higher than the most competitive deposit rates. This situation makes a significant amount of money from other investment channels, the most direct of which is the transfer channel to corporate bonds.

“The strong growth in terms of scale, liquidity and accessibility has made corporate bonds from being an institutional investment channel gradually becoming a new investment option for individual customers”, SSI Research reviews.

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Individual investors should be careful with corporate bonds

According to SSI Research, the interest rates higher than deposits have a strong appeal to investors. However, profits often come with risks, bond ownership means that investors become creditors of issuers and will face the risk of insolvency / liquidity of enterprise.

At the moment, there is no independent intermediary ranking corporate bonds, self-rating of bonds is beyond the ability of individual investors.

Therefore, investors need to carefully understand the capacity of the intermediary distribution organization in fulfilling its commitment to repurchase before maturity and the fees charged. In many cases, the fee for reselling bonds before maturity can erode the gap with deposit rates.

Recently, commercial banks simultaneously reduced their deposit interest rates by 0.1 to 0.9 percentage points depending on each term from July 1, recording the strongest interest rate reduction since the end of 2019. This interest rate has been lower than 0.75-1% / year for terms of less than 6 months and 1-2% / year for terms of 6 months or more compared to the end of 2019 and widening the interest rate gap of corporate bond.

SSI Research said that the sharp increase in corporate bond issuance recently could be a speeding step before the draft revision of Decree 163 towards tightening individual issuance of corporate bonds comes into reality. After two years of acceleration, the number of outstanding corporate bonds in circulation is already quite large and may be one of the factors that make it difficult for deposit rates to decrease much in the second half of 2020.

The Ministry of Finance warns of risks to the corporate bond market

Facing the situation that real estate businesses increase capital mobilization through bonds and individual investors promote holding corporate bonds, the Ministry of Finance has issued a risk warning for this market.

Accordingly, the Ministry of Finance recommends that issuing businesses must calculate specific cash flows to develop a feasible bond issuance plan, ensure debt repayment capacity and comply with the provisions of law on bond issuance.

The capital from bond issuance must be tied to the purpose of issuance, not for the purpose of selling to individual investors but broken down into lots with many bond codes. Enterprises must also take measures to fully and timely implement commitments to investors, including commitments to repurchase bonds before maturity.

For investors, the Ministry of Finance recommends that they need full access to information, analysis and thorough assessment of possible risks when investing in bonds.

Before deciding to invest, investors need to request businesses and distribution organizations to provide accurate information on the financial situation including the situation of raising bond capital (number of issues, volume issued, outstanding balance, payment of interest, principal ).

According to the regulator, only when they know the information about bonds and carefully consider the risks they may encounter, investors (especially individuals) should buy bonds.

At the same time, the Ministry of Finance stressed not to buy bonds just because of high interest rates, because there is a possibility of failure to recover the investment (including both principal and interest) if the issuer encounters difficulties.