Bond Market Expected to Face Great Challenge Next Year

Many challenges are expected to await the bond market next year although a number of cuts in the benchmark interest rate have boosted the demand of domestic credit institutions for bonds since September, said Do Ngoc Quynh, chairman of the Vietnam Bond Market Forum.

 

Quynh pointed to the risks of a possible decline in the liquidity in the secondary bond market if no timely measures are taken.

 

Foreign investors’ bond holdings have tended to shrink as they adjust investment portfolios and seek assets and markets with lower risks, all of which will affect the domestic bond and stock markets during early 2009, Quynh said.

 

Foreigners now hold only US$500 million-US$600 million of Vietnam bonds, compared to about US$3 billion at the middle of this year, according to the HASTC data.

 

Commercial banks and insurance firms, which had accelerated their purchases of g-bonds from foreign investors in Vietnam this year, are likely to buy fewer next year.

 

In order to develop the bond market in the coming months, Quynh pointed out two measures: the government should assure economic stability to boost investor confidence, and the infrastructure, legal framework and management of state and corporate bond markets needed to be enhanced. (Vietnam Economic Times)