Adjusting IPO roadmap to balance market

Investors and experts have hailed the Government’s adjustment of the initial public offering (IPO) roadmap by state-owned enterprises (SOEs) under the equitisation process, calling it a suitable reaction to market changes.

After several unsuccessful IPOs since March, Prime Minister Nguyen Tan Dung has asked the Ministry of Finance and the State Securities Commission (SSC) to adjust the IPO plan in order to balance supply and demand, reduce the threats of a volatile market and ensure investors’ interests as well as limit state budget losses.

As many as 40 enterprises have made IPOs with nearly 451 million auctioned shares since early this year, according to the Monetary Policy Department under the State Bank of Viet Nam.

In a short period of time, a large amount of shares were issued; whilst investment capital was limited, making auctions bored. The average share price of IPOs since March has risen little over the initial level. Even worse, withdrawal of investors has meant many enterprises had to conduct a second auction. Typical examples were Viet Nam Insurance (BVI) and the PV Insurance Company (PVI).

According to experts, while the securities market has not yet been recovered, if IPOs keep going on as scheduled, shares will be devaluated, causing losses to both the state and investors.

Nguyen Trong Dung, Vice Director of the Government Office’s Enterprise Reform Department revealed that to-be-equitised SOE capital scale is so huge that pumping more commodities into the securities market while supply is over demand will cause loss to the state.

Deputy Director of the Institute for Market and Price Research under the Ministry of Finance Ngo Tri Long agreed that the IPO roadmap applied to major SOEs should be adjusted.

On these ground, several commercial banks reconsidered their IPO itinerary.

From now to the year-end, four commercial banks, including the Bank for Investment and Development of Viet Nam (BIDV) and 21 SOEs are scheduled for equitisation, resulting in a large amount of money about to be injected into the market.

BIDV is preparing for its IPO, but the bank should think twice, no deadline is to be fixed and it is necessary to ensure an appropriate price which will not only benefit the State but also ensure employees’ interests, said BIDV General Director Tran Bac Ha.

This message was echoed by Minister of Finance Vu Van Ninh, who said enterprises’ IPOs should be based on the market’s demand. The process of SOE equitisation will continue to be conducted as defined in a Prime Minister decision, but to-be-equitised enterprises should take time preparing IPOs, the minister added.

In 2007, as many as 20 SOEs, including the Ha Noi Beer Corporation, the Sai Gon Beer Corporation, the Viet Nam Commercial Bank (VCB), the Mekong Delta House Development Bank, the House Development and Investment Corporation and the Ha Noi Urban Development Corporation are set for equitisation. The number should top 71 by 2010.

Source: VNA