The worst may not be over yet for Vietnamese developers besieged by a sweeping regulatory crackdown, as a funding squeeze and a historic stock meltdown show few signs of easing.   

Shares in No Va Land Investment Group and Phat Dat Real Estate Development both went limit down on Thursday (Nov 24), marking at least 17 straight days of declines.

No Va Land’s 2026 US dollar bond also plunged to a record low this week, Bloomberg-compiled data indicated. 

The South-east Asian economy has made headlines in recent weeks after a corruption probe landed heavily on the country’s property developers, pummelling domestic debt sales and turning local stocks into the world’s worst-performing major benchmark.

Despite a pledge by Vietnam’s finance minister to ease funding woes for builders, the sector’s repayment pressure in the next few years is keeping investors on the edge. 

Tamma Febrian, an analyst at Fitch Ratings, said that there is a risk that if they’re clamping down a little bit too hard, the authorities could cause a liquidity crunch or damage investor sentiment.

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While that is not the rating firm’s base case, such an outcome “could have repercussions on the entire property sector and the banking sector”. 

Vietnam’s corporate bond sales and volumes tumbled this year, with sales through private placements falling by 51 per cent to 240.76 trillion dong (S$13.3 billion) up till October, said the Vietnam Bond Market Association (VBMA). That represents 96 per cent of the total corporate bond sales, it added.

The benchmark VN Index has plunged 37 per cent, driven by developers and banks, amid fears of wider contagion.   

Banks, real estate firms and construction companies are among the biggest issuers of corporate notes this year, said the Asian Development Bank (ADB).  

Vietnam’s broader financial woes, including rising inflation and a bulging debt pile, have weakened foreign investors’ appetite for the country’s assets across the board. Vingroup, a major conglomerate, is the only firm to have issued foreign-currency bonds this year, raising a total of US$625 million, said the VBMA. 

In a clear attempt to assuage investor concerns, Vietnam’s Finance Minister Ho Duc Phoc told Bloomberg News this week that the government does not see a wider impact beyond the select firms that have engaged in bad or illegal practices. It is also working to ease developers’ access to capital in the long run. 

By 2030, Vietnam aims to grow corporate bond volumes to 25 per cent of gross domestic product from about 11 per cent currently, he added. 

However, investors seem worried about not just the current liquidity woes faced by developers, but also their repayment risks in the medium term. The ADB’s data shows that the bulk of their bonds have maturity of less than five years. 

“The sell-off in property stocks does not come as a surprise, given the funding constraints,” said Ruchir Desai, a fund manager at Asia Frontier Capital.

“Another worry for the sector is its upcoming bond repayments in 2023 and 2024, and how these will be funded, as liquidity to the real estate sector has dried up.” BLOOMBERG