Corporate Bond Market in the Transition Economy of Vietnam, 1990-2010

Working Papers CEB, No. 10/001, Centre Emile Bernheim, Universite Libre de Bruxelles

38 Pages Posted: 8 Jan 2010

See all articles by Quan Hoang Vuong

Quan Hoang Vuong

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management; Phenikaa University

Tri Dung Tran

Dan Houtte, Vuong & Partners

Date Written: January 7, 2010

Abstract

Corporate bond appeared early in 1992-1994 in Vietnamese capital markets. However, it is still not popular to both business sector and academic circle. This paper explores different dimensions of Vietnamese corporate bond market using a unique, and perhaps, most complete dataset. The State not only intervenes in the bond markets with its powerful budget and policies but also competes directly with enterprises. The dominance of SOEs and large corporations also prevents SMEs from this debt financing vehicle. Whenever a convertible term is available, bondholders are more willing to accept lower fixed income payoff. But they would not likely stick to it. On one hand, prospective bondholders could value the holdings of equity when realized favorably ex ante. On the other hand, the applicable coupon rate for such bond could turn out negative inflationadjusted payoff when tight monetary policy is exercised and the corresponding equity holding turns out valueless, ex post.

Given the weak primary market and virtually nonexistent secondary market, the corporate bond market in Vietnam reflects our perception of the relationship-based and rent-seeking behavior in the financial markets. For the corporate bonds to really work, they critically need a higher level of liquidity to become truly tradable financial assets.

Keywords: Vietnam, Corporate Bond, Interest Rate, Transition Economy, Debt Market

JEL Classification: G32, G38, O16

Suggested Citation

Vuong, Quan Hoang and Tran, Tri Dung, Corporate Bond Market in the Transition Economy of Vietnam, 1990-2010 (January 7, 2010). Working Papers CEB, No. 10/001, Centre Emile Bernheim, Universite Libre de Bruxelles, Available at SSRN: https://ssrn.com/abstract=1532717 or http://dx.doi.org/10.2139/ssrn.1532717

Quan Hoang Vuong (Contact Author)

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management ( email )

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Phenikaa University ( email )

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Tri Dung Tran

Dan Houtte, Vuong & Partners ( email )

Ha Noi
Vietnam
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