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High inflation, accelerating interest rates and the depreciated a dong were seen as main obstacles for any bond funds to mobilise capital, said Trinh Hoai Giang, vice general director for Ho Chi Minh Securities Corp.
In addition, bond funds operating in Vietnam would find it hard to attract investors, Giang said. While domestic institutions prefer do the investment themselves, individuals with short-term and restrain financial ability can invest in bonds.
Giang said foreign investors in 2008 massively bailed out Vietnam’s bond market out of fear of the possible collapse of the local economy and show no sign of returning.
According to Do Ngoc Quynh, general secretary for Vietnam Bond Market Association (VBMA), while bond funds suited investors fond of safety, Vietnamese investors usually gave priority to short-term trades with higher return.
Yields on two to five-years bonds are now at 10.5 to 11 per cent, which much lower current bank deposit rates of up to 14 to 16 per cent.
“Vietnam’s bond market is fledging, in which investors have not been classified yet. Mobilising capital for this kind of fund is not easy,” he said.
Vietnam does not have a legal framework for establishing bond funds, although fund management firms have operated in the nation’s market since 2003.
Tran Thanh Tan, general director for Vietnam Fund Management (VFM), said he would start up a bond fund worth VND500 billion ($24.15 million) as soon as the kind of fund was allowed by law. The initial capital would be raised from some insurance firms, he said.
Tan hoped the bond fund would animate local bond market.