Shares in Vietnam developers rally on roll back in corporate bond reform

HANOI (Reuters) - Shares in Vietnamese property developers rose on Monday after the government amended corporate bond regulations in a bid to ease pressure on a sector squeezed by a credit crunch - in a change that temporarily rolls back parts of a major market reform adopted last year.

The move came as some corporate bond issuers, particularly in the real estate sector, face liquidity difficulties and a crackdown that has seen the arrest of high-profile business executives and the tightening in September of rules on the trading of privately placed corporate bonds.

The reforms, which were meant to increase investors' protection in a largely unregulated market, were welcomed by international institutions as a way of boosting market confidence.

Shares of Vinhomes, Vietnam's largest property developer, rose 4.6%, while share sin the second-biggest listed developer, No Va Land, were up 6.8% by midday on Monday.

Companies redeemed 210.83 trillion dong ($8.9 billion) of bonds in 2022, up 46% against 2021, according to the Vietnam Bond Market Association. 

Under the amended regulations, domestic bond issuers can now negotiate with bondholders to make principal and interest payments in assets, instead of only cash, and extend bond maturities by up to two years.

Compulsory credit ratings will also not be required, at least until the end of this year.

An official at an international Institution, who declined to be named because of rules on speaking to media, said the overhaul meant retail investors might continue to purchase bonds based on the yield and the issuer's reputation without understanding the underlying risks.

Can Van Luc, a government adviser and an economist at the Bank for Investment and Development of Vietnam, said the temporary changes were "expected to remove most of the problems related to bonds maturing this year and next year."

However, he said bond issuers should brace for the reintroduction of tighter measures next year. 

The Ministry of Finance said last month 285.2 trillion dong ($12.04 billion)worth of corporate bonds will mature this year, 42% of which were issued by real estate developers. 

A Hanoi-based stock broker welcomed the tweaked reforms but said some bondholders may not accept payments in assets from developers with low liquidity.

($1 = 23,695.0000 dong)

(Reporting by Khanh Vu, Francesco Guarascio and Phuong Nguyen; Editing by Ed Davies)