ADB: There have been bond defaults in the real estate sector in Vietnam

There have been a number of defaults in Vietnam amid a tense corporate bond market, especially in the real estate sector, according to ADB.

The Asian Development Bank (ADB) in its Emerging East Asia Bond Yield Report said that the expansion of both government and corporate bond segments helped Vietnam’s bond market grow 5.1% quarter-on-quarter to $111.9 billion. The corporate bond market has been active again after the Government loosened some related regulations.

From March 1 to June 2, government bond yields fell across all maturities as the State Bank eased monetary policy to support economic growth and promote financial stability, especially in the real estate sector. ADB also noted that there have been some defaults amid the stress in the corporate bond market, especially in the real estate sector. The real estate equity index has fallen by about 50% since January 2023.

FiinRatings - a credit rating unit of FiinGroup - in its report in early April, said that 43 real estate enterprises had recorded late interest payments and bond debt. The total value of these late-paid bonds was VND78,900 billion. This unit also informed that real estate is the industry with a bad debt ratio of bonds at over 20%, the second highest after the energy industry. However, the real estate industry has the largest outstanding bond size, accounting for 33.8%.

The ADB report also pointed out that bond yields in the emerging East Asia region (including ASEAN member economies; mainland China; Hong Kong; South Korea) fell in the March-May period amid falling inflationary pressures and slower monetary tightening in the US.

Financial conditions in the region remain broadly stable, even amid uncertainty over the stance of the US Federal Reserve (Fed) and potential risks in the banking sectors of key economies.

Most regional central banks have slowed the pace of interest rate hikes, and banking sector turmoil in the US and Europe has had only a limited impact on regional financial markets so far, said ADB Chief Economist Albert Park. However, in the US, concerns about financial stability and inflation are leading to uncertainty about the Fed’s monetary stance. Financial conditions in the region may continue to be affected by this uncertainty, he said.

Emerging East Asia’s total local currency bond stock rose 9.1% year-on-year to $23.8 trillion at the end of March, driven largely by a surge in sovereign debt issuance at the start of the year to fund economic recovery programs. Corporate bond issuance has remained moderate, partly due to higher interest rates.

Duc Minh

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