Vietnam's corporate bond market constrained by skewed structure and valuation bottlenecks

Vietnam’s corporate bond market faces structural and operational shortcomings, including a lack of a unified pricing framework and a standardized data system. These gaps reduce liquidity and transparency, and make it harder to compare bond quality across issuers.

Market structure and funding mismatch

At a bond forum in Hanoi last week organized by FiinGroup, Fiin Ratings and S&P Global, experts said Vietnam’s privately issued corporate bond market remains the dominant channel, accounting for over 90% of total issuance. The 1–3 year tenor segment represents about 57% of issuance. Real estate and banking continue to lead, while manufacturing and trade together account for around 9%.

Experts said this imbalance raises a key issue: as infrastructure financing demand rises, the current bond market structure is not well suited to channel long-term capital.

Infrastructure investment needs and constraints

Infrastructure investment funds face valuation bottlenecks. According to Nguyen Ba Hung, Senior Economic Expert at the Asian Development Bank (ADB), public investment is expected to rise to 8–10% of GDP per year, up from about 6% previously. With GDP around $500 billion, this implies an additional $10–20 billion in investment capital annually.

However, infrastructure financing still relies heavily on three traditional channels—state budget, bank credit and the bond market—each with limitations. The government budget is stretched, bank lending is short-term, and bond financing for infrastructure remains a small share, with most bond issuance directed to real estate and financial institutions.

Supply and demand factors

On the demand side, many project developers lack capacity to absorb funds. Delays in project progress and a limited number of cash-flow-stable projects also reduce fundraising ability. On the supply side, the absence of long-term institutions such as pension funds and insurers, along with limited capability to assess and manage infrastructure risk, restrains supply.

Potential model: InvITs

Experts discussed the possibility of adopting an Indian-style InvIT (Infrastructure Investment Trust) model. InvITs convert operating cash flows into tradable investments, mobilizing market capital and enabling developers to reinvest.

India already has 12 InvITs with total market capitalization near $20 billion. Given that infrastructure projects typically involve complex financial risks, large initial capital outlays, and cash flows that stabilize after operations—often with investment cycles spanning 15–20 years or longer—long-term, stable funding is viewed as essential.

While infrastructure funds are seen as a promising solution to mobilize diverse capital and diversify risk, effective deployment in Vietnam would require a transparent, standardized bond pricing system and comprehensive, clean, representative data.

Pricing framework and data fragmentation

FiinGroup’s Trần Phú Việt, Director of Bond Product and Valuation, said Vietnam’s bond market lacks a universal standard for determining asset value. Transaction data is scarce and dispersed, leading to divergent valuations for the same bond across institutions. This fragmentation also complicates building reference yield curves that reflect risk by tenor.

“Until we can separate the base rate from credit risk premia, pricing will remain inconsistent, potentially mispricing net asset value (NAV) and eroding investor confidence,” Việt said.

He argued that upgrading market infrastructure toward standardized data, a unified pricing mechanism, and integrated analytical and risk-monitoring tools is needed to move from fragmentation to a more transparent market that supports long-term capital allocation. However, data must be large in scale, clean, and representative.

Việt also noted that secondary-market liquidity remains low because investors tend to hold bonds to maturity, making it difficult to construct a standardized yield curve. He suggested grouping bonds by credit rating to form a reference yield curve, using aggregated data across multiple issuers within the same risk band even when trading data are limited.

“If we expand credit rating coverage and improve data quality over the next 5–10 years, information quality and market transparency will improve significantly,” he said.

Quality of collateral and limitations on information

Beyond pricing, experts said gaps in collateral quality and clear data also hinder price formation. Duong Kim Anh, Investment Director at Vietcombank Investment Fund Management Co., said high-quality collateral is scarce and secondary-market illiquidity arises when investors hold bonds to maturity, limiting market data and valuation activity.

She added that mutual funds typically access listed bonds, which account for less than 10% of total outstanding bonds. Around 80–85% of listed bonds are issued by banks, which constrains exposure to other sectors. Insurance-linked funds, while more flexible, are restricted from investing in bonds issued for debt restructuring, further narrowing investment options.

“Many manufacturing and service enterprises with good collateral do not issue bonds; only under financing stress do they turn to the bond market, leading to uneven bond quality,” she commented.

Secondary liquidity and collateral mechanics

According to SSI Asset Management’s Nguyen Xuan Quynh, a major bottleneck is collateral mechanics for private placements. For listed bonds, investors base risk assessment largely on corporate financials since most do not have collateral. For privately placed bonds with collateral, equity and real estate are the main collateral types, with real estate described as more complex to value and liquidate.

Regulatory direction and expected improvements

Improving secondary-market liquidity would require expanding supply and widening the investor base through public bond issuance, though regulatory approvals and due diligence remain hurdles. Kim Anh said that from 2026, mandatory credit-rating for publicly issued bonds will apply, and she expects the approval process to be streamlined through quantitative assessment, supporting increased supply and liquidity.

Quynh emphasized that transparency remains critical, particularly for individual investors who face difficulties obtaining reliable, comprehensive information on bonds. He said greater disclosure and standardized, multi-dimensional information are essential to spur liquidity and attract broader interest in the bond market.