Bond Funds Updated – January 2023
Dragon Capital Vietfund Management would like to provide the following update on bond funds in January 2023:
Bond funds’ performance overview in 2022:
Despite the unfavored market conditions for bond funds in 2022, the two funds – DCBF and DCIP, were still able to maintain positive annual growth as of 4.5% for DCBF and 3.0% for DCIP respectively on December 31st , 2022. This can be considered a positive endeavor given the liquidation of more than 50% of fund size to accommodate investors’ redemption request in the fourth quarter of 2022 as a result of bond market upheaval. It’s worth acknowledging that satisfying the liquidity of investors has always been carried out as committed by the funds without any interruption during the recent challenging period.
Bond market situation at the beginning of 2023
After a difficult fourth quarter of 2022, the bond market in early 2023 has seen significant changes in a more positive direction, in particular:
– With the decline of USD value, the pressure on the money market has eased. The USD/VND exchange rate fell by 4.8% on February 15, 2023, compared to its peak in early November 2022. Furthermore, the FED’s rate cut schedule, which is expected to begin in the second quarter of 2023, will provide a fundamental foundation for global and Vietnamese financial markets to deal with controlling inflation and lowering interest rates to support the economy. This trend will greatly help the bond market to stabilize and receive more benefits.
– The draft amendment to Decree 65/2022/ND-CP on corporate bonds has been completed and will be submitted to the Government for consideration and approval in February 2023, opening more rooms for restructuring issued bonds, contributing to the relief of the corporate bond market’s general difficulties, which have prolonged since the fourth quarter of 2022.
– Vietnam’s economy in 2022 has achieved the highest growth of the 12 years term with GDP growth as of 8.02%, and it is expected that in 2023 Vietnam will continue to be a attract more FDI, the crucial factor to stabilize economic and monetary policy.
Aside from the positivity, the market still faces liquidity challenges. According to data from the Vietnam Bond Market Association (VBMA), in 2023, there will be about VND 285,178 billion value of bonds maturing. The value of real estate bonds coming to maturity is about more than VND 119,000 billion, the pressure of maturity will increase much in the second and third quarters, noting that the real estate market is facing many prolonged difficulties that cannot be able to solved in 2023.
Update for investors
In general, we expect that the year 2023 to have more positive prospects for the market in general and bond fund activities in particular. However, for investors in the short term, investment and holding of bond funds should be mapped with your personal financial objectives to make the right decisions.
We also want to remind that the free redemption fee of DCBF and DCIP bond fund will be terminated on February 28, 2023, and we fully respect your decisions during this time.
We really appreciate your prior support and look forward to continue accompanying with you in your investment journey.