ANZ Vietnam Sees Dollar-Bond Sales Topping 2012: Southeast Asia

Australia & New Zealand Banking Group Ltd. plans to arrange overseas corporate bond sales by Vietnamese companies this year that will exceed last year’s total as the nation’s improving economy lures global investors.

ANZ is working to manage “a handful” of dollar-denominated corporate bonds that are expected to top the country’s $250 million issued last year, Phan Thi Thanh Binh, head of global markets for Vietnam, said in an interview in Hanoi April 12. Vietnam Joint Stock Commercial Bank For Industry and Trade, or VietinBank, was the only issuer of international dollar bonds in 2012. The first overseas bond sale this year could take place as early as the third quarter, Binh said.

“There is increasing interest now for Vietnamese paper and we don’t have enough of the papers out there for investors,” Binh said, declining to name the issuers. “The stable currency is a very important factor for foreign investors. Interest rates are coming down.”

Vietnam’s corporate bond market is set to pick up as the country’s economy stabilizes and companies need capital amid a credit crunch after national growth slumped to its slowest pace since 1999 last year. The economy grew 5.03 percent in 2012 and the World Bank predicts expansion of 5.2 percent this year.

Vietnam’s macroeconomic stability “will persist” and the “risk of a sharp economic shock is low,” Matt Hildebrandt, a Singapore-based economist at JPMorgan Chase & Co, wrote in e-mailed report April 9.

Improving Economy

The economy is improving after inflation slowed to a six-month low in March and exports climbed 20 percent in the first quarter from a year earlier. The dong has been steady at about 20,900 per dollar this year. The yield on benchmark five-year local-currency government bonds slid to 8.5 percent on March 29, the lowest since February 2009.

“There are some special features of the Vietnamese bond market making it a rational policy for private companies to seek financing on international markets,” Alan Pham, chief economist at VinaCapital Group in Ho Chi Minh City, said via e-mail today. “The state is borrowing so much that it takes up a large share of domestic credit available. The private sector has to make do with what is left over.”

Vietnam’s government sold almost 65.5 trillion dong of bonds in the first quarter, or 34 percent of its 2013 plan, the Ministry of Finance said in a statement April 10. The government will boost domestic debt sales this year to about 150 trillion dong as its revenue dropped 2.6 percent while expenditures rose 6 percent in the first quarter, the ministry said. It sold a record 141 trillion dong of securities last year.

Corporate Plans

Bank for Investment & Development of Vietnam last year planned to sell $500 million of dollar-denominated bonds overseas, Quach Hung Hiep, a deputy general director at the bank known as BIDV, said in July. The company has not completed the sale yet, according to data compiled by Bloomberg.

Vingroup JSC, Vietnam’s biggest property developer, pulled a planned overseas sale of as much as $300 million of bonds because of high yields, Chief Executive Officer Le Thi Thu Thuy said in December. The developer plans to pursue a strategic investor or go back to the bond market when yields are more attractive, Thuy said.

Interest from international investors for Vietnamese bonds overall is increasing, ANZ’s Binh said. “Last year, we didn’t see many inquiries on Vietnam overall, but now we’re getting more inquiries about Vietnam’s notes.”

Yield Premiums

The average yield premiums on dollar bonds for Vietnamese borrowers was 323 basis points more than Treasuries on April 15, compared to a 308 basis-point spread for Chinese issuers and a 273 basis-point spread in Indonesia, according to HSBC Holdings Plc indexes. Dollar bond spreads in Vietnam on April 11 fell to a December 2010 low, according to HSBC. Borrowing costs for Vietnamese issuers also fell to a record-low of 3.79 percent on April 12, according to HSBC indexes.

The Vietnamese government has sold two international bonds, $1 billion of notes in January 2010 and $750 million of bonds in October 2005.

Vietnamese companies may prefer to issue corporate bonds to boost their visibility and establish benchmarks for further debt. The country’s banks have been reluctant to lend on concern about non-performing loans that plague the financial system and relatively high interest rates.

The bad-debt ratio dropped to 6 percent of outstanding loans as of Feb. 28, from “about 8 percent” last year, Vu Duc Dam, chairman of the Government Office, said that day.

Lending Slowdown

Bank lending slowed this year after growing 9 percent in 2012, which was the slowest pace in at least two decades. The monetary authority will promote credit flows to spur economic growth, it said on April 4, reiterating its target of 12 percent.

The central bank cut interest rates last month, the seventh policy easing since the start of 2012. The monetary authority has struggled to spur lending that slowed on concern over non-performing loans. The refinancing rate is now 8 percent compared with 15 percent at the end of 2011.

Prime Minister Nguyen Tan Dung formed a steering committee last month to restructure banks by 2015. The government will discuss the establishment of a debt asset management company at a meeting at the end of this month as part of its plan to overhaul the banking system.

— With assistance by Nguyen Dieu Tu Uyen, and Tanya Angerer

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