Structural shifts to drive corporate bond growth

Vietnam is set to accelerate the rebuilding and deepening of its corporate bond market.

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Guy Deslondes, Global Head of Emerging Markets Development at S&P Global Ratings, shared with VIR's Khanh Linh his perspective on the structural foundations needed to deepen the market.In many emerging markets, the development of corporate bond markets has been closely linked to the rise of long-term institutional investors. How critical is this for Vietnam?

A diversified and sophisticated investor base is central to corporate bond market development. In most emerging markets, issuer quality tends to follow the strength of the investor base, with long-term institutions driving demand for transparency, longer tenors, and more consistent pricing.

In Vietnam, the market remains relatively concentrated, with commercial banks holding more than 90 per cent of outstanding corporate bonds, largely through private placements. While this structure has supported early-stage growth and provides a degree of stability, it also constrains liquidity and limits price discovery. Bonds are typically held to maturity, reducing secondary market activity and restricting broader investor participation.

Expanding the role of institutional investors, including pension funds, insurance companies, and mutual funds, will be critical. Their participation would support liquidity, more regular issuance, and a more balanced market structure.

Vietnam still has a relatively low proportion of bonds with formal credit ratings compared to other Asian markets. At what stage does the use of credit ratings typically accelerate, and how does it affect market behaviour?