Bank shares: not appealing now, but attractive in long term

Bank shares seem to be unappealing to investors at this moment as there are few transactions of bank shares. However, experts believe that they will become attractive in the long term.

Southern Bank shares are selling at VND37,000/share, down by VND40,000/share from the highest level. The share price could not bounce back even when mass media reported good news related to the bank: groups from Hong Kong, Singapore and the US had meetings with the bank’s leaders, expressing their desire to cooperate; and the bank plans to raise its chartered capital to VND3tril this year.

Eximbank, OCB, Dong A and VP Bank have also reported good business results for the first six months of the year, but their share prices still slid in the last time and there are no signs of the imminent recovery of these share items.

In fact, Eximbank’s shares slightly increased in mid July 2007 to VND7.8mil/share, but dropped again later to the VND7mil/share level. The price of OCB shares also dropped to VND4.1-4.3mil from VND12.5mil/share. Dong A shares are now trading at nearly VND7mil, down by a half compared to the beginning of the year.

On the official market, ACB shares are trading at VND118,000/share, and STB, VND57,000. Technical factors (issuing bonus shares, and the right to buy preferential shares) were thought to have brought the price decreases of these items. However, experts have said that price decreases are common to all bank shares.

Johan Nyvene, Director General of HSC Securities Company, said that bank shares had dropped by 60-70% in the last four months, and this should be seen as a problem worthy of attention. However, Mr Nyvene still thinks that it is the right time for long-term investors to buy in.

Vietnam’s banks remain young if compared to banks in other countries in the world, but they are promising. Only 5-6mil Vietnamese people ((6-7% of population) have accounts at banks, the total outstanding loans remain low, at 66% of GDP. Therefore, the banking sector will develop further together with the fast-growing national economy.

In a recent survey conducted by Deutsche Bank, Vietnam’s banking sector is attractive in the eyes of foreign banks.

Dang Quang Gia, Lecturer at the HCM City Banking University, also said that it was the right time for investors with long-term vision to buy bank shares. Mr Gia said that bank shares would become hot in the last months of the year when banks reported satisfactory business results.

Source: VNE