How to ‘rescue’ capital for businesses?

Injecting money is the best way to save liquidity for businesses, but according to experts, the fundamental solution must be to strengthen confidence in the market.

The three main channels for raising capital of enterprises are bonds, stocks and credit30g. “But this year, these three legs seem to be tied up,” commented Mr. Nguyen The Minh, director of analysis at Yuanta Securities.

According to a recent survey by the Private Economic Development Research Board (under the Prime Minister’s Advisory Council on Administrative Procedure Reform), businesses are in a “precarious” situation because of a lack of capital.

Why is the capital stuck?

Capital flows began to tighten from the bond channel. After three years of continuous growth from 2018 to 2021, accumulated for the first 9 months of this year, the total issuance value decreased by more than 43%, to VND 248,600 billion. Towards the end of the year, the scale shrinks.

This year is the maturity of the 3-4 year bonds issued in the period of 2018-2019. New mobilization to pay off dues is what businesses usually do, but it’s now almost impossible. One of the reasons is that the confidence of bond investors is affected after recent fluctuations, although in theory bonds have a higher level of safety than many other investment channels.

Analyzing the recent situation, Maybank Investment Bank Vietnam in a recent report assessed that the tightening regulations and high interest rate environment forced companies to buy back more bonds, leading to daily liquidity problems. the more serious.

Enterprises are under pressure to buy back bonds before maturity. In 9 months, the scale of buying ahead of time increased dramatically with more than 135,000 billion dong. Net mobilization from corporate bond channel this year is only around the threshold of VND 100,000 billion, compared to the mobilization of more than VND 700,000 billion last year.

The congestion of this mobilization channel makes it difficult for banks and real estate businesses. These are also two actors that play an important role in the economy but also participate in the issuance of bonds the most.

For banks, reduced bonds have an impact on their ability to lend. Bonds help increase tier 2 capital (additional capital besides own capital), increase liquidity buffer and improve short-term capital utilization ratio for medium and long-term loans. Lacking this mobilization channel, their loan expansion limit is hindered.

Cash check transaction at a bank in Ho Chi Minh City. Photo: Thanh Tung

For real estate businesses, to balance cash flow when bonds are “clogged”, they have to depend more on bank loans and the stock market. While the stock market is less active, credit becomes the last possible channel. As a result, credit skyrocketed at the beginning of the year, and real estate was one of the fastest growing sectors.

But in a year when inflationary pressures were high due to the “storm” of commodity prices, credit was tightly controlled, money flowed strongly into one industry, which meant the rest of the market was short of capital. As a result, the group of manufacturing enterprises also suffers from the same situation as being “hungry” for capital.

However, this vicious cycle has not stopped.

“One problem this year is that production enterprises also strain liquidity, causing many businesses to withdraw payment deposits from banks to use. This creates a loop, difficult businesses, difficult banks. , then this makes it difficult for businesses,” explained Mr. The Minh.

In fact, since the beginning of this year, bank deposits have grown much lower than credit, although this channel’s interest rates offered to depositors have continuously increased. Part of the reason is the withdrawal of deposits of corporate groups.

According to current regulations, commercial banks that raise 100 VND can only lend up to 85 VND. The ratio of outstanding loans to mobilized capital (LDR) of many banks hit the ceiling. Credit is already difficult and even more difficult, not only because of liquidity problems but also due to the need to ensure capital adequacy factors.

Solution – money, time and trust

With that context, according to experts, the economy needs a total solution for all three main channels of capital, instead of just choosing to solve a single bottleneck, which is credit “room” or bonds or stocks.

It’s not that businesses can’t handle it, but the problem is “they don’t have enough time,” commented Yuanta Securities’ director of analysis. The pressure to pay interest and bond payments came due at the same time as the disruption of mobilization channels. The developments happened so quickly that many businesses, practically without assets, could not manage in time.

“Unlike securities that can be sold immediately, selling a property is not easy,” Minh said. According to him, bank credit can be an option to help them have “more time”, to have money to overcome temporary difficulties.

Difficulties of current investors. source: VnExpess

According to data from the State Bank, by the end of November, credit of the whole economy increased by 11.5%, this figure is lower than the target of 14% for the whole year. Experts say that a part of the remaining credit line can be used to support instant capital for businesses.

How much to use in the remaining credit room also needs to be carefully considered. Dr. Can Van Luc, Chief Economist of BIDV, member of the National Monetary and Financial Policy Advisory Council, thinks that 1% credit room can be an option.

According to Maybank Investment Bank Vietnam, injecting money for bond rescue funds is a feasible option, but a small amount will be reasonable (about VND 20,000-30,000 billion), and only applies to bonds or bond funds. there is “quality” in the market.

However, support for enterprises should be considered to ensure capital adequacy criteria. In particular, two groups that need attention are banks and real estate businesses. “Remove” these two groups, according to Mr. The Minh, the problem of capital flow for production will also be solved.

With a cautious view, economist Le Duy Binh, Managing Director of Economica Vietnam, said that putting efforts into “saving” real estate should be carefully considered because this means that there will be other businesses that are difficult to follow. near capital.

Currently, there are other proposals from some businesses such as setting up relief funds or using idle budget funds. Meanwhile, experts disagree with these options.

Mr. Le Duy Binh said that this proposal is not suitable because it does not solve the root of the problem and is wrong in principle. Dr. Can Van Luc shared the same opinion that because public investment capital has not been used but all have “addresses”, it is not possible to use this idle money to put into a field that needs a long time to recover like real estate.

The fundamental solution, according to experts, is to restore the confidence of the market and investors.

According to the assessment of Board IV, the effect of decreasing confidence in real estate businesses has spread to all types of businesses. When cases about bonds happen, investors panic, people flock to businesses to demand to sell bonds before maturity. On the secondary market, even class A bonds were sold off. Bond funds, which have had stable returns in recent years, saw a net withdrawal of up to trillions of dong.

“Trust will be restored if buyers are assured that they will receive a refund. Therefore, businesses need to handle upcoming bond maturities and ensure the rights of buyers,” commented expert The Minh.

In a meeting with securities companies and bond-issuing businesses on November 23, Minister of Finance Ho Đuc Phuoc also urged businesses to “maintain credibility with bond investors by any means necessary.” In fact, if liquidity becomes difficult, business leaders must consider selling assets.

Bond values due from Q4/2022 to Q4/2025 for real estate companies and other businesses (in billion VND). Graphic: MayBank IB

According to economist Le Duy Binh, to restore trust, the first thing is to provide complete information that helps people visualize the specific situation.

“Businesses are facing difficulties, but to what extent, which groups are struggling, which groups are doing well. Among the businesses issuing bonds, there are surely some legitimate businesses with good cash flow, fulfilling commitments to bondholders,” he said.

In terms of policy, this expert believes that it is necessary to distinguish between what the state should intervene in and what is the market’s concern. For example, easing the bond market is necessary, but it needs to be done correctly and cautiously, otherwise it will affect the entire banking system and cause inflation. At the same time, the management agency must also consider resources for other areas.

Regarding the management policy of individual bonds, Mr. Can Van Luc believes that reducing or extending the time for implementing regulations on issuance and investor participation according to Decree 65 should also be considered. Mr. The Minh and Maybank Investment Bank Vietnam also share the same viewpoint.