The local bond market has grown double in size over the past five years, said Do Ngoc Quynh, Secretary of the Vietnam Bond Market Association (VBMA).

Recording an average annual growth rate of 30 percent, it was the highest growth recorded in East Asia and ASEAN regions, Quynh told a local newspaper. He added that the growth of the bond market was a "bright spot" in the overall picture of Vietnam's financial markets.

The restructuring of the economy has supported the bond market growth in Vietnam. (Photo for illustration: voh.com.vn)

The total value of the bonds in circulation at the end of 2014 was approximately 760 trillion VND (equivalent to 38 billion USD and 19.3 percent of the GDP), including 700 trillion VND (32.8 billion USD) from the government bonds (G-bonds).

The volume of corporate bonds issued successfully also increased over the years. In 2014, it was worth approximately 40 trillion VND (1.87 billion USD), up 30 percent from 2010.

Quynh pointed out that the restructuring of the economy has supported the bond market growth in Vietnam.

However, the secretary also saw limitations of the market, adding that its scale (19.3 percent of the GDP) was still much lower than the target of 38 percent of the GDP, set for 2020. The terms of G-bonds were also shorter than the target. Most of the best-selling terms were of five years and below, while the government wanted to sell more bonds with longer terms such as 10 and 15 years.

In addition, with the capitalisation of approximately 38 billion USD, the local bond market was still smaller than in the other countries in the region, including the Philippines with 102 billion USD (equivalent to 37.6 percent of the GDP) and Thailand with 282 billion USD (76.3 percent of the GDP).

The size of local government bonds was also smaller than the two remaining components of the financial system, credit institutions (100 percent of the GDP) and market shares (31.5 percent of the GDP).

Quynh thought the problems could be solved by implementing measures to improve the quality of the market and develop more products to attract more investors.

The country should also improve the legal framework for the issuance and investment of corporate bonds. Quynh said that, in particular, the government should amend the local decree to reduce the procedures for bond issuance to encourage more participation in the market.

At the same time, they should also offer incentives and reduce fees and procedures to attract investors, especially foreign investors to the local bond market.

Source: VNA