Vietnam's stock market experienced a sharp decline of 5.6% on Monday, marking its largest single-day drop in six months. This downturn was prompted by a recent report from regulatory authorities, which revealed serious violations by several major commercial banks and real estate companies in corporate bond issuances. The immediate catalyst for this sell-off was an investigative report released by the Government Inspectorate on Friday. According to local media, the report covered bond issuance from January 2015 to June 2023, detailing multiple violations by issuers, including banks and real estate firms, related to fund misappropriation, disclosure failures, and overdue principal and interest payments. Novaland, Vietnam's second-largest listed real estate developer, was accused of channeling funds through complex processes to related company Nova Homes, having issued corporate bonds worth 15 trillion VND, with some registered capital found to be non-existent. Investigations revealed that Novaland Group and its three subsidiaries engaged in misconduct during bond issuance. Among the 20 issuers related to Novaland, nearly 169 trillion VND in bonds remained unpaid as of mid-2023, with companies such as GreenWich and BNP Global facing overdue principal and interest, raising concerns about their payment capacities. Furthermore, examinations of five major commercial banks revealed that Military Bank and Asia Commercial Bank misused tens of trillions of VND of bond funds for short-term loans, contrary to their planned medium- to long-term credit or investment uses, breaching funding utilization and disclosure regulations. The sharp decline in the VNI index affected major stocks, including Vingroup, Vinhomes, and Vietnam Foreign Trade Bank, which saw the largest losses. Investor sentiment worsened following the release of the inspection results, especially after Novaland Group announced its inability to fulfill convertible bond payment obligations, prompting panic selling across the market. Novaland became the focal point of the investigation, with two cases concerning corporate bond violations involving Novaland and its subsidiaries handed over to the Ministry of Public Security for further inquiry. As Vietnam's second-largest listed real estate company, Novaland, listed on the Ho Chi Minh City Stock Exchange (HOSE), is a component of the VN30 index (comprising the largest 30 publicly listed companies in Vietnam). As of 2025, it held about 8% market share, ranking third in Vietnam's real estate sector, only behind Vingroup and Dat Xanh Group. Data from the first half of 2025 indicated that the top five real estate companies controlled 60% of the market share, with Novaland being a leading player boasting strong competitiveness in the high-end residential and large-scale integrated project sectors. Investigations revealed that Novaland Group had increased capital for its subsidiary Khai Hung Real Estate Company through issuing 15 trillion VND in corporate bonds. Khai Hung subsequently used these funds to acquire 99.9% ownership of The Ky Hoang Kim Real Estate Company from Vo Thi Kim Khoa, valued at 18.43 trillion VND. However, cash flow examinations of multiple banks uncovered that Khoa's capital in The Ky Hoang Kim Real Estate Company was non-existent, as most funds were transferred out on the same day she received them. Additionally, after Novaland Group transferred the bond proceeds of 15 trillion VND to Khai Hung, the funds were circulated "through multiple intermediary companies," ultimately reaching Nova Homes Trading Joint Stock Company. Government inspectors identified that Novaland Group and its three subsidiaries—Unity, Aqua, and Lucky House—violated regulations in corporate bond issuance. After receiving the bond proceeds, individuals transferred about 70.84 trillion VND for use by Nova Homes Trading Joint Stock Company. Inspectors stated that while they couldn't verify each intermediary transaction, Novaland Group and its subsidiaries appeared to have utilized similar methods to misappropriate bond capital, coordinating with individuals and corporate entities in capital registration, using bond income to acquire equity, and channeling funds to Nova Homes Trading Joint Stock Company. Marco Martinelli, a partner at Turicum Investment Management, noted that investor sentiment rapidly "deteriorated" following the release of inspection results. He pointed out that Novaland Investment Group's announcement regarding its inability to meet convertible bond obligations further exacerbated market pressures: "The fragility of the market lies in the strong rebound over the past few months, encouraging retail investors to increase leverage. Once negative news emerged, the market was easily subjected to forced liquidations, leading to widespread panic across sectors." The associated companies are deeply mired in debt, raising concerns about their solvency. In addition to Novaland itself, the inspection report flagged numerous related companies for serious violations and debt issues. Among the 20 issuers affiliated with Novaland, as of June 30, 2023, nearly 169 trillion VND in bonds remained unpaid, with four issuers missing principal and interest payments and two others missing interest payments, totaling 45.55 trillion VND in debt. Specifically, four affiliated companies were identified for misconduct: GreenWich, which failed to pay over 15.7 trillion VND in principal and over 241 billion VND in interest after issuing bonds and utilizing 20 trillion VND in proceeds; BNP Global, which defaulted after issuing 21 trillion VND in bonds and still had 12.16 trillion VND in overdue principal as of April 12, 2024; Cat Lien Hoa Real Estate Development, found to be late in paying principal and interest after issuing 9.86 trillion VND in bonds; and Residence Investment and Development, which paid a "deposit" for purchasing vacation villas to Nova Homes Trading Joint Stock Company through issuing 30 trillion VND in bonds, which inspectors noted was essentially a means for Nova Homes to sustain long-term utilization of bond funds. The inspection not only exposed issues within real estate companies but also highlighted regulatory gaps in the banking system regarding bond issuance and fund management. The report examined five major commercial banks, including Military Bank (MB), Asia Commercial Bank (ACB), VPBank, Vietnam International Bank (VIB), and Oriental Commercial Bank (OCB), which collectively issued over 255 trillion VND (approximately 9.7 billion USD) in private corporate bonds during the inspection period. As of mid-2023, 173 bond codes, totaling nearly 980 trillion VND, remained outstanding. Inspectors determined that three out of the five banks misallocated bond proceeds. ACB raised 37 trillion VND through two bond issuances in 2018 but subsequently used nearly 24 trillion VND for short-term loans, contrary to its publicly announced plan to allocate funds for medium- to long-term credit needs. Similarly, Military Bank redirected 19.2 trillion VND in funds from 11 bond codes issued in 2022 towards loan operations rather than planned investment activities. The report indicated that these banks failed to properly track and manage the funds raised, merging all bond revenue into general business capital and subsequently lending it to borrowers. Inspectors also found that several banks, including VIB and MB, failed to adhere to disclosure requirements, lacking clarity in their pre-issue information release concerning funding utilization timelines, while ACB and MB violated timelines for releasing certain bond-related information. Some banks had not prepared annual capital plans for bond issuance from 2016 to 2019, resulting in their data systems being unable to accurately separate bond funds from other loan sources.