Moody's enters Vietnam rating market with joint venture

BY Reuters | CORPORATE | 09/20/23 05:53 AM EDT

HANOI, Sept 20 (Reuters) - Vietnam's finance ministry has issued a license to a credit rating agency co-owned by U.S. giant Moody's, the company said, allowing for the first time a U.S. firm to get involved in the rating of domestic issuers of corporate bonds.

The authorisation caps a long push by Moody's and U.S. authorities to obtain the licence and comes shortly after U.S. President Joe Biden boosted formal ties with Vietnam during a trip to Hanoi earlier in September.

Vietnam Investors Service and Credit Rating Agency (VIS Rating), in which Moody's owns a 49% stake, will provide credit rating services to domestic corporate issuers, Moody's said in a statement late on Tuesday, noting outstanding bonds in Vietnam were worth 13% of the country's economy.

Vietnam has recently tightened regulations on privately placed bonds after property developers and other sectors accumulated excessive debt, but it has delayed the entry into force of some of the new rules amid turmoil in the corporate bond market and the real estate sector.

In September no corporate bonds were issued in the country, according to the latest report published this week by Vietnam Bond Market Association (VBMA).

Under the new rules expected to be in place from next year, it will be compulsory to obtain credit ratings for new placements for companies which sold bonds worth more than 500 billion dong ($20.58 million) in the preceding 12 months or exceeding half of the company's equity.

"As Vietnam's domestic bond market develops, credit ratings and research will play a meaningful role by helping companies access new capital, formulate funding strategies, signal transparency, and maintain investor confidence during times of market stress," Moody's said.

Vietnam's other licensed credit rating agency, FiinRatings, has a partnership with Moody's' rival S&P Global Ratings. Japan's Nikkei held a 17% stake in the company until 2020, according to FiinRatings' website.

($1 = 24,300 dong) (Reporting by Phuong Nguyen and Francesco Guarascio; Editing by Kim Coghill)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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