Financial Management Name: NGUYEN THI THIEN TAM ( 阮氏善心 ) ID: MA0N0216 VIETNAM BOND MARKET Annuity Commodity

A YOUNG AND GROWING MARKET  The Vietnam bond market development was boosted when Vietnam entered WTO in Total market capitalization is now at 15% of GDP.  > 500 government bonds outstanding on some USD 12 billion  After 2008 foreign exodus the market today is predominantly Vietnamese with a handful of big players. In the absence of mutual funds and pension funds, banks dare key players.

A YOUNG AND GROWING MARKET (cont)

 Issuers Government bonds: Issued by the State Treasury and authorized issuers such as Vietnam Development Bank (policy bank) Municipal bonds: issued by city municipalities and provincial governments. Corporate bonds: issued by SOE’s and private enterprises THE MARKET  Investors Domestic investor base still small. Ability to absorb supply and demand shocks limited Off-shore investors still limited (no limitation on foreign holdings of bonds)

THE MARKET (cont)  Product range ● Mostly plain vanilla fixed coupon bonds ● Pseudo floaters fixed with 12m average deposit rate quoted by 4 big SOCB’s. ● Callable tier 2, convertibles although mostly with mandatory conversion.  Secondary market although on the increase, still thin ● Bond market tend to be very domestic ● At times >100 bps diff between public sources and the market. ● No surprise discrepancy tend to get worse during period of big movements.

GOVERNMENT BONDS Source: DC, indicative, as end of August 2009 Government bonds here are State Treasury bonds and VDB (Vietnam Development Bank). Issued institutional debt since Steady levels of % prior WTO. Approximately 500 government bonds outstanding as of August 2009 with an average size of <USD20m equiv. Listed on HNX. Ceiling rates are defined by MOF

MUNICIPAL BONDS  Approximately 65 Municipal bonds outstanding with an average size of USD10m equiv.  Only 3 known issuers; Ho Chi Minh City, Hanoi and Dong Nai Province, tightly controlled by central government  Ceiling rates defined by MOF (ca 20-30bps over govvies)

CORPORATE BONDS Corporate bonds market has grown rapidly in 2009 due to improvement in legal framework Approximately corporate bonds totaling ca USD 3.5bn equiv outstanding. Credit culture will take some time to develop onshore. -No domestic rating service -Only some banks and the government itself have public international ratings at this time

Mostly vanilla structures but also some subordinated, callable and pseudo-convertibles have been issued. CORPORATE BONDS (cont)

Vietnam has some 23 billion dollars in external debt but only a fraction is tradable commercial debt. By far the most liquid bond is the 6 7/8% Intern’l USD 750 million bond. VIETNAM’S INTERN’L DEBT

VIETNAM’S WAY FORWARD Vision: The Government is for the capital market to reach 50% of GDP in 2910 and 70% in Macro-fundamentals provides good base: GDP growth average 7.5% last 20 years, GDP growth for 2009 at 5.2%, 2010 targeted 6.5%, Inflation less than 7%; Funding needs for cape investment is both in public and private sector Structural improvements: + Additions to existing framework to enhance transparency, predictability, accounting and audit requirements; + Market infrastructure reforms (support from ADB, WB …) in primary and secondary trading (dedicated bond trading platform), depository, settlement; liquidity (buy-back program). + Initiative to set up local rating services.

VIETNAM’S WAY FORWARD (cont) Setting up of a new Debt Management and External Finance Department under MOF: centralized Debt Management House under the Public Debt Law with clear roles and responsibility and dynamic risk management. Reaffirm commitment to welcome investors: + Measures to encourages foreign investors and domestic institutional investor base (pension funds, life insurance firms); + Constructive dialogue with SRO – Vietnam Bond Association. 1 st Initiatives includes Market Conventions; Repos market development. Promoting regional initiatives such as ABMI; Welcome additional technical assistance.

Thank you