ADB warns that Vietnam's corporate bond market is heavily dependent on banks

One of the biggest bottlenecks in Vietnam’s corporate bond market is an excessively high concentration of both issuers and investors, according to the Asian Development Bank (ADB). At the same time, ADB said Vietnam’s growth outlook for 2026–2027 depends on continued support from domestic policy while external risks remain elevated.

ADB flags concentration risk in corporate bond market

ADB said credit institutions and real estate developers accounted for more than 90% of corporate bond issuance in 2024–2025. On the investor side, commercial banks hold about 55% of total outstanding corporate bond debt, leaving limited room for broader participation from other institutional investors.

Commercial banks remain the largest holders of outstanding corporate bonds, accounting for about 55% of total outstanding debt. Insurance companies and pension funds account for about 9%.

Economic outlook for 2026–2027

On the morning of April 10, ADB in Vietnam held a press conference to update the economic outlook for Vietnam for 2026–2027. ADB projects Vietnam’s economic growth at 7.2% in 2026 and 7% in 2027, compared with 8% in 2025. The forecasts assume that the conflict in the Middle East will stabilize soon.

In the short term, ADB said growth momentum in 2026 is supported by accelerated disbursement of public investment and a monetary policy stance that remains accommodative, which supports domestic demand and market confidence. It also cited continued contributions from foreign direct investment (FDI) and exports, reflecting resilience in export-oriented manufacturing.

However, ADB warned that adverse external factors—especially the prolonged Middle East conflict and US tariff policies—could weigh on capital inflows, raise logistics costs, and reduce export activity.

Inflation and domestic financial constraints

ADB projects inflation will rise to 4% in 2026 before easing modestly to 3.8% in 2027 as supply conditions stabilize.

Despite the outlook, ADB said domestic financial risks continue to constrain growth. It highlighted liquidity pressures in the banking system, rising bad debts, and potential weakening effects on monetary policy from depreciation of the VND. These pressures may continue to limit credit growth, which has a target of around 15% for 2026—lower than the previous year.

How corporate bond market weaknesses limit funding

ADB said the underdevelopment of the corporate bond market remains a major bottleneck for the development of Vietnam’s capital market. It noted that the 2019–2021 period saw very rapid growth in corporate bond issuance, with issuance volume increasing by more than 50% annually and bond debt reaching nearly 15% of GDP. ADB said this expansion also exposed gaps in the legal framework, limited information transparency, and rising credit risks.

To address these issues, the government tightened regulations related to private placements, investor participation, and credit-rating requirements. ADB said these reforms improved market discipline and investor protection, but they were implemented amid post-COVID slowdowns and ongoing difficulties in the real estate market, making structural weaknesses more evident.

Private placements and information gaps

ADB said the market remains heavily dependent on private placements, which have made up more than 90% of total issuance since 2018. While this structure can give issuers flexibility, ADB said it reduces transparency and restricts investors’ access to information.

ADB also pointed to an early-stage credit-rating and information-disclosure ecosystem. It said mandatory rating requirements were only recently introduced, and the number of issues subject to mandatory ratings remains limited. ADB said the narrow scope increases information asymmetry, weakens price discovery, and limits the emergence of a reliable market-based pricing mechanism.

ADB recommendations and expected policy direction

ADB urged policymakers to balance strengthening market discipline with facilitating compliance to enhance transparency, restore investor confidence, and support long-term development. It said expanding the issuer base and institutional investors, reinforcing information disclosure and rating frameworks, and ensuring consistent rule enforcement are essential.

ADB added that increasing participation by long-term institutional investors would be decisive in reducing dependence on the banking system and improving financial market resilience. If these bottlenecks are addressed effectively, ADB said the corporate bond market could become a pillar of the financial system by providing stable, long-term capital for economic growth.

Regulatory update on private placement

Separately, the Ministry of Finance is finalizing a draft decree amending regulations on private placement of corporate bonds. The decree is expected to be issued in April 2026 to increase transparency, tighten market discipline, and meet enterprise financing needs.