CEO FiinRatings shares prospects of corporate capital channels and the strategic management role of independent BOD members at the VNIDA 2023 Forum

July 14, 2023, Ho Chi Minh City – Mr. Nguyen Quang Thuan (Chairman of FiinGroup, Member of the VNIDA Advisory Council) delivered a keynote presentation at the Independent Directors Forum 2023 organized by the Vietnam Independent Directors Association (VNIDA). Adopting the theme of "Reshaping the Future: Empowering Independent Directors for Success", this year's forum brought together independent directors (ID) to share proactive measures in effectively dealing with challenges, seizing opportunities to create competitive advantages for businesses, creating a business environment that fosters long-term value creation, ethical decision-making, and sustainable development.

Sharing about "Vietnam's Economic Outlook & Drivers for Recovery", Mr. Thuan evaluated Vietnam’s economy in the first half of 2023 and provided an outlook for the second half of 2023, considering the challenges in maintaining the target of 6% GDP growth in 2023. These challenges are put in the context of a significant decline in foreign direct investment (FDI), slow disbursement of public investment, cheerless import-export activities, and remaining difficulties  in corporate capital channels, despite strong policy interventions by the Government and the State Bank of Vietnam.

Regarding the corporate capital market, capital access is comparatively challenging due to low credit growth, limited corporate bond channels, and increasing non-performing loans. These internal factors hinder economic growth as well as posing mid- and long-term risks to the financial system.

Assessing the prospects of corporate capital channels, FiinRatings recognizes that Vietnam currently has room for selective monetary and fiscal easing. Specifically, credit growth can be based on institution’s ratings, by the difference in credit quality across sectors and among businesses in a particular sector. Among the capital channels for the economy, domestic corporate bond (DCB) remains as a promising channel for businesses that meet ‘credit standards’. Enterprises with good credit ratings are considering raising funds through individual bond issuances or public bond offerings, including green bonds.

Focusing on the real estate sector, to overcome capital mobilization challenges, the key issue discussed was the need to handle project legal issues on a large scale and set the stage for the "bankability" factor of projects. Thereby, credit is gradually expanded in a selective way, bonds issuance is gradually restored and served as a premise for M&A/project transfer for the market to self-correct, and new cash flows into Real Estate is the most effective self-restructuring measure.

To evaluate the current credit quality of real estate sector from the perspective of an independent credit rating agency (CRA), FiinRatings is monitoring three key risk factors: (1) Impacts of supportive policies, including maturity extension and debt forbearance of bond, credit, and especially removing legal difficulties for project; (2) Sales and liquidity of real estate market: sales prices are decreasing but liquidity remains the key for recovery; (3) Funding accessibility: raising funds from banks, corporate bond and debt market.

Mr. Thuan also shared some recommendations to promote the role of independent BOD members in supporting the BOD and BOM in coping with the current business environment and prospects. Mr. Thuan referred to a survey conducted by FiinGroup & VNIDA in November 2022 on the role of independent BOD members. Accordingly, most of independent BOD members currently participate in the Audit Committee. The predominant professional expertise is finance, while there are not many BOD members with in-depth expertise in strategy, risk management, and ESG sustainable development (ESG - Environmental, Social, and Governance) to support businesses in overcoming the current challenges and seizing new opportunities.

About FiinRatings

FiinRatings operates in the field of credit rating, licensed by the Ministry of Finance, providing credit ratings and related services to issuers, creditors and investors in Vietnam credit market. FiinRatings is also Vietnam first green bonds approved verifier, in accordance with the green bond international standard by the Climate Bonds Initiative and a Vietnamese pioneer in ESG Evaluation and ESG Scoring for Vietnamese companies. For more information, please visit: https://www.fiinratings.vn

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Email: support.fiinratings@fiingroup.vn