Bond Market Needs to Grow

On the occasion of the Vietnam Investment Forum organised by Euromoney on March 19-20, Vietnam Business Forum correspondent Kim Phuong interviewed Mr Brian P. Baker, Chief Executive Officer & Director of Pimco Asia Limited. Pimco is one of the world’s leading fixed-income fund management companies, based in Hong Kong.

I think the financial market in Vietnam has a continued growth tendency. The stock market and bond market are new. They are not only new to people who are issuing, but also new to people who are investing. There has been incredible interest in the equity market in Vietnam. The equity market was up a hundred and forty four per cent last year and already this year up almost fifty per cent. The bond market is not as attractive, the equity market is small but the bond market is even smaller.

I think there are several reasons the bond market has not attracted so much interest. One is that domestic investors rarely choose banks for their company loans. So they don’t have as much retail interest in bond market as in equity market. For international investors, bond markets here are solely in liquid and small and not many liquids on the market and most of the bonds are government bonds.

 

We want to send the message that Vietnam has a very positive story to tell. Fundamentals in this country are very good. It has a very good demography, and the young people will continue to grow the economy. Vietnam is becoming much more integrated into the global economy. They are producing and trading more.

The government is continuing reform. We hope regulations are developed for the market, to draw more issuers into the market so there are more people to borrow in the bond market, from the government and key corporations. I hope to expand the number of borrowers in the bond market.

It is very attractive time now for the emerging market countries to borrow. There is a lot of liquidity in the global marketplace; a lot of investors are looking to invest in countries like Vietnam, emerging market countries. The government will need funds in the future for infrastructure development. If they could borrow now their expenditure would be more favourable.

Finally, one concern we have is the healthiness of the market. We are concerned about liquidity in the Vietnamese financial market. There is a lot of fast money invested into the equity market that could lead to the bubble effect. We hope that any policy put into place does not adversely affect the bond market. The bond market is not in a bubble. One could argue about whether the equity market is in a bubble or not, but if the government believes the equity market is getting ahead of itself then they want to slow down the equity market by issuing a specific policy focused on the equity market, not the bond market. The bond market does not exhibit the same bubble tendency as the equity market.

 

Pimco is one of the world’s leading fixed-income fund management companies. I know the fund may invest up to 20 per cent in foreign securities.

Could you please tell me some details about that?

We invest more than twenty per cent in emerging markets. We manage six hundred and eighty billion dollars in the bond market for our clients. More than 20 per cent is outside of US bonds. Within our company, we have about thirty billion dollars invested in emerging markets around the world: Latin America, East Europe and Asia. We do own Vietnamese bonds, we would like to own more but there is not enough market supply available to investors. So we hope that more supply will be brought to the market to allow Pimco and other investors around the world to get more exposure to Vietnam’s economic picture.