The corporate bond market is expected to improve in 2025, with recovery driven more significantly by corporate bonds rather than bank bonds, which dominated the market in 2023. What opportunities and challenges lie ahead for this sector?

2024: A bank-driven market According to the Vietnam Bond Market Association (VBMA), the total value of corporate bonds issued from January to December 20, 2024 amounted to VND418,197 billion. This included 404 private placements worth VND368,083 billion, accounting for 92.3% of the total. This marks a 25% increase from 2023 and a 55% rise against 2022, reflecting a notable recovery in the corporate bond market. Nonetheless, a closer look shows that more than 70% of the bonds issued in 2024 originated from the banking sector, an upsurge from 58% in 2023. The real estate sector, which made up 22.5% of the 2023 figure, saw its shares diminish. Excluding bank-issued bonds, the total issue by other enterprises in 2024 appears lower than in the previous year, as investor confidence in the corporate bond market has yet to fully rebound. On a positive note, the slow repayment of principal and interest on bonds has improved since early 2024. Many enterprises have successfully negotiated extensions with bondholders, signaling a gradual recovery in the market. According to remarks by securities firm VCBS, the corporate bond market is gradually stabilizing. The restructuring process under Government Decree 08/2023/ND-CP has progressed well, supported by lower interest rates and improvements in the secondary market for bonds issued via private placement. Increased listings and liquidity have further contributed to market stability. Banks continue to maintain a favorable position in bond issuance due to their strong reputations and established brands, which make it easier to attract investors. Banks also invest significantly in one another’s bonds to enhance safety ratios and comply with regulatory requirements, such as using short-term capital for medium- and long-term lending. Most bank bonds are issued to settle previous bond obligations or to repurchase bonds before maturity. This allows banks to restructure terms, optimize their tier-2 equity capital, and leverage lower interest rates. As of December 20, 2024, VBMA reported that the total value of corporate bonds bought back before maturity reached VND186,534 billion, with banks accounting for over 73% of this total. While banks dominated the market in 2024, forecasts suggest a broader recovery in 2025, driven by non-banking businesses. Recent successful bond issues by major companies, including real estate giants such as Vinhomes, Becamex and Nam Long, indicate growing investor confidence and potential buoyancy in the market. Opportunities and challenges in 2025 The real estate market is showing signs of recovery, buoyed by the implementation of the revised Land Law, Real Estate Business Law, and Housing Law. These legislative updates have eased legal hurdles and resolved longstanding issues, contributing to a more favorable investment climate. Concurrently, apartment prices in several projects have surged, bolstering investor confidence in the recovery prospects of real estate enterprises. This renewed optimism is expected to translate into increased investments in bonds issued by these companies. As the real estate market continues to rebound, enterprises will likely ramp up bond issues to finance new and promising projects. Beyond real estate, manufacturing companies are poised to accelerate bond issuance to fund their investment projects and expand their operations, driven by a positive economic outlook for 2025. Similarly, securities companies are expected to leverage the bond market to mobilize capital, anticipating a more dynamic business environment alongside prospects for a stock market upgrade. The recently amended Securities Law introduces clearer regulations for privately issued bonds, addressing previous limitations. While the earlier law restricted the sale of privately issued bonds to professional investors (both individual and institutional), the new framework allows issuers to sell bonds to non-professional investors who meet specific criteria such as credit ratings, collateral, or bank guarantees. This adjustment is expected to increase transactions in the private bond market by broadening the pool of eligible investors. Additionally, the enhanced transparency and protective measures embedded in the new regulations are set to mitigate investment risks and strengthen investor confidence. With corporate bond debt currently accounting for around 10% of GDP, the market holds substantial potential for growth, especially with the Government’s goal of raising the ratio to at least 25% of GDP by 2030. Key to achieving this expansion will be restoring investor confidence, increasing market transparency, and curbing unlawful bond issues. The amended Securities Law introduces additional safeguards to protect investors and tighten controls on bond issues. For instance, the State Securities Commission now has the authority to revoke approvals even after bonds are issued. Moreover, service providers, including consulting, underwriting, and custody organizations, along with bondholder representatives, are required to verify the accuracy of issuance documents and compliance with conditions. The corporate bond market faces significant hurdles in 2025. A considerable volume of corporate bonds, totaling VND250,000 billion, will fall due this year, followed by VND230,000 billion in 2026. The pressure will peak in Q3 2025, with bond maturities reaching VND70,000 billion, a 1.6-fold increase compared to the same period in 2024. The burden will be particularly heavy in July and August, especially for real estate firms. Although Government Decree 08/2023/ND-CP provides a legal framework for extending bond maturities, extensions are capped at a maximum of two years. This constraint means a large volume of bonds will still fall due starting in Q2 2025, likely increasing the volume of delayed principal and interest repayments in the latter half of the year. Amid a global trend of rising interest rates, businesses face higher costs for bond issuance, further complicating efforts to raise funds in an already challenging environment..