Where are billion dollars to be injected?

Vietnamese people heard recently that foreign investment funds are planning to pour several billion dollars worth of capital into Vietnam. And a question has been raised about where the huge capital is to be injected in, as there seems to be no more room for foreign investors.

Foreign investors now hold 49% of shares in big companies, including AGF, BMP, SAM and TAY, and 30% in STB. Under the current regulations, foreign ownership must not be higher than 49% in local joint stock companies, and 30% in local joint stock banks, which means foreign investors have no more opportunities to buy shares of the companies.

Meanwhile, the room for foreign ownership in other companies is also nearly running out: the foreign ownership in BT6 is 48.96%, CII 48.98%, SJS 44.98%, and VNM 46.26%. Especially, REE and SHC “have been well in advance of the age” as the two companies have sold 55.47% and 56.5% of shares respectively to foreign investors

Dang Huu Chau, former student of Tokyo University, who is now the securities broker for many Japanese tourists/securities investors in Vietnamese stock, also said that the share items of which the foreign ownership hits the ceiling level of 49% or 30% are the ones that can bring the fattest profit. Many Japanese investors want to make investments in these blue chips, but they cannot because there is no more room for them.

The Securities Brokerage Division under the Saigon Securities Incorporated (SSI) also said that many foreign investors could not buy the share items they want though they placed orders three weeks ago.

In fact, foreign investors still can buy some blue chips, but just in small volume as the room in these companies is nearly running out. However, as for foreign investment funds, the small volume is not worth their disbursement.

Don Lam, Director General of Vina Capital stressed that only when Vietnam offers more room for foreign investors, can the market become more bustling.

Raising the foreign ownership ratio in local companies proves to be the best solution to lure more foreign capital into Vietnam. However, the State Securities Commission (SSC) has recently stated that the Government of Vietnam does not think of this issue right at this moment. As such, several billion dollars worth of investment capital are still waiting to be injected in Vietnam.

Foreign investors believe that opportunities will come in several months, when a lot of big companies make IPOs. They also heard that SSC is compiling a new regulation on foreign investors’ management, which may allow foreign investment funds to open branches in Vietnam sooner than that stipulated in WTO commitments. However, analysts have warned that there would not be many chances for them, as the companies that make IPOs operate in the fields that limits foreign ownership, including banking, telecommunication and finance.
These companies include Vietcombank, BIDV (banking), MobiFone and Vinaphone (telecommunication).

In May 2007, foreign investors doubled the investment in Vietnam’s stocks: they injected $150mil in stocks in May, while the figure was $80mil in April, equal to the sum of money they poured into Vietnam in December 2006, and February 2007 (Source: Vietnam Monitor 2, June 8, 2007, HSBC Hong Kong).

Garry Evans, the stocks analyst of HSBC, who has been keeping close watch over Vietnam’s stock market, has advised investors to remain cautious with their deals, and not to become aggressive buyers at this moment, since the P/E Index proves to be too high: 34. The analyst said that investors should wait for the IPOs to appear in August, October and December.

However, a lot of foreign investors cannot keep patient as they were advised, as they have been put under hard pressure to disburse funds’ capital. Investment funds from the Republic of Korea, for example, have successfully raised $1bil worth of capital and they now compete with others in capital disbursement. Korean investors are the ones who won the right to buy most of Bao Viet’s shares at the recently held auction.

The analyst has named some share items that foreign investors can still buy in, FPT, VHS, PPC, PVD, SJS and ITA (the foreign ownership in these companies is below 20%). If the HCM City Securities Trading Centre (HSTC) does not offer more commodities, the foreign capital flow will not be able to increase.

Meanwhile, HSTC has reported that it has just received the applications for listing from few companies. At this moment, it seems to be not the right time to list, when the daily trading value is just VND500-600bil ($31.25mil).

Source: VNE