Vietnamese stocks plunged on October 20 after a government investigation found some bond issuers had not used proceeds for their intended purpose, but the selloff was short-lived.
On October 17, the government inspectorate published a report finding that property developer No Va Land Investment Group and three banks had used proceeds from onshore bond issues for purposes other than those they had stated in the offering documents, according to Vietnamese media.
Its inspection covered 67 issuers in the period from January 1 2015 to June 30 2023, and all of the bonds have already been redeemed, except for one No Va Land note that had its maturity extended. The government inspectorate said it had referred files on alleged breaches in the bond deals to the ministry of public security for further investigation.
The outcome of the report was known months ago to the issuers involved. A second report is due to be published in the coming weeks that will focus on bond issuance by small and medium-sized enterprises.
No Va Land’s shares fell by the daily limit of 7% on October 20 and the benchmark VNI index fell 5.5% as investors reacted to the publication of the findings.
“The whole market was trading at inflated valuations,” said a market source in Vietnam. “Drawdowns of 5%–10% in a day are not unusual in a market rally driven by margin trading. Ninety percent of stock market investors are retail.”
No Va Land said in a statement that it acknowledged some shortcomings in its bond issuance activities and said it remained “fully committed to making utmost efforts to develop and implement remedial measures”. The developer said one of the causes was the impact of the pandemic over a two-year period.
It has already redeemed all of the bonds mentioned in the investigation, except one which was restructured. It has made principal and interest payments to reduce the outstanding principal to D833bn (US$32m) from D1trn and is discussing possible solutions with bondholders, the company said.
No Va Land has been facing liquidity pressure in recent years, and on October 17 said it had missed a coupon payment due the previous day on its US$335m 5.25% convertible bonds due 2027, constituting an event of default. No Va Land blamed short-term cashflow challenges and volatile market conditions and said it was preparing a consent solicitation exercise to remedy the situation. The CBs were created when No Va Land defaulted on a US$300m CB due 2026 and restructured it last year.
While No Va Land’s shares dropped another 7% on October 21, the VNI index rebounded 1.7% and is up more than 30% this year to date.
“Post-'liberation day', things felt bleak, but then Vietnam managed to negotiate the tariff down to 20% and the mind of the market is now focused on domestic reform,” said the market source.
Vietnam has announced huge infrastructure and development projects, like a high-speed railway, with a cumulative value of half of GDP. Much of the development will be done by the private sector, which has boosted the share prices of conglomerates like Vingroup that are expected to be involved in big projects.
FTSE Russell also announced this month that Vietnam would be reclassified as an emerging market from a frontier market with effect from September 2026, adding to foreign investor appetite. LSEG, the parent company of IFR, owns FTSE Russell.
The market source said that the investigation into bond issuance is unlikely to knock investor confidence, especially given that almost all of the bonds in question have been repaid. “Mr and Mrs Nguyen didn’t lose money,” he said, referring to Vietnamese retail investors.
Regulatory reforms
The bonds in question were sold before Vietnam reformed its regulations around issuance, following several incidents that shook confidence in the market, including the country’s largest financial fraud case. Property group Van Thinh Phat was found to have misappropriated proceeds from US$1.2bn-equivalent of bonds issued through subsidiaries of the company between 2018 and 2020.
In 2022, Vietnam implemented tougher requirements for bond issuers, requiring them to be more transparent about their use of proceeds.
Since September 11 this year, public bond issues must have credit ratings at either the issuer or bond level, apart from those from credit institutions or issues that are backed by guarantees. Other rule changes include a requirement that issuers’ total liabilities, including bonds, should not exceed five times their equity, with some exceptions for particular kinds of issuers. The time between registration and secondary market trading of bonds has been cut to 30 days from 90 days, and the approval process for issuance by credit institutions has been streamlined.
Vietnam Investors Service (Vis Rating), an affiliate of Moody’s, said in a note on October 15 that more than 75% of issuers meet the new rules and are eligible to issue bonds under the new framework.
“We expect these changes to serve as a catalyst for improving efficiency and discipline in market practices, laying the groundwork for a more resilient bond market,” wrote Vis Rating. “Over time, issuers should gain faster, more flexible access to capital, while investors benefit from clearer risk signals and a more diverse range of investment options.”
The market source said there is still no real credit curve in the Vietnamese market. "The spread comes from liquidity conditions rather than fundamentals," he said.
There were about D1.3 quadrillion, equivalent to US$49.4bn, of corporate bonds outstanding at the end of September, according to the Vietnam Bond Market Association. The banking sector accounted for 70% of issuance in the third quarter, followed by the real estate sector at 22%. More than half of new issues had a tenor of one to three years, which is likely due to the lack of duration-focused investors like pension funds in the local market.
In the first nine months of 2025 there were 26 bond defaults, including 11 principal defaults, and the default rate was 1%, according to Vis Rating. The average recovery rate for defaulted bonds is 38%, though a restructuring of five bonds issued by Hung Thinh Land in September gave bondholders a recovery rate of just 5.8%–20%.