(Bloomberg) — Vietnamese stocks tumbled the most in six months amid renewed concerns that tighter scrutiny of corporate bond issuance may once again freeze credit and weigh on growth.
The VN Index tumbled 5.5% at the close on Monday, the most since April 8. Vingroup, Vinhomes and Bank for Foreign Trade of Vietnam were among the biggest drags on the measure.
The Government Inspectorate of Vietnam on Friday released findings from inspection of 67 bond issuers, including five banks, which highlighted “various violations,” according to local media reports. The offenses include misuse of proceeds, inadequate disclosures, poor capital management, delayed principal and interest payments, and premature project sales.
Heightened jitters over the credit market in Vietnam echo broader concerns over borrowers’ creditworthiness across global markets. Investors are looking for signs of stress from the US to Europe as high equity valuations and lingering trade pressures cloud the economic outlook.
Investor sentiment “deteriorated” after the news on the inspection result, said Marco Martinelli, a partner at Turicum Investment Management. “The recent strong rally over the past few months had encouraged retail investors to increase leverage, leaving the market vulnerable to forced selling once negative news emerged.”
Reports of Novaland Investment Group’s failure to pay interest due Oct. 16 on more than $335 million convertible bonds and a potential government probe also weighed on risk appetite.
The reemergence of credit concerns comes just as the country celebrates its long-awaited upgrade to secondary emerging-market status by FTSE Russell. It is also a setback for a nation looking to improve its corporate governance standards, and a reminder for global investors of the risks associated with frontier market investing.
The shadow of Vietnam’s bond crisis in 2022 still hangs over its equity market. High-profile arrests, along with a wider regulatory crackdown on market manipulation and illicit bond issuance, weighed on the nation’s stocks, making the benchmark among the worst performers globally that year.
“It could take a few sessions for the market to stabilize,” said Tran Hoang Son, head of market strategy at VPBank Securities. The 1,600-point level will serve as a key technical support, he said.
(Updates with background and analyst comments in last two paragraphs.)
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