Bank shares prices to bounce back

Bank share prices will recover sooner or later, experts say. However, the prices will not reach previous levels, when the overly hot stock market made shares overvalued.

On the OTC market, bank share prices have been decreasing by 50-60% in the last time compared to the beginning of the year. On the official market, ACB and STB still have not seen any signs of recovery. However, experts assert that bank shares prices will recover, sooner or later.

Don Lam, Director General of VinaCapital, has assured investors by saying that in any case, bank shares will not see further decreases. He said that the price decrease of bank shares in the last three months was inevitable, since prices always go down after a time of escalating.

Director of Dragon Capital Dominic Scriven shared the same view, saying that as bank share prices had been decreasing continuously in the last time it was not likely they would drop further.

Mr Scriven said that banking remained a sector with great potential in Vietnam if compared to other business sectors. Statistics show that the ratio of total credit growth on GDP growth rate is 55% in Vietnam, while the figure is over 400% in the US. To date, only 8% of total population in Vietnam has bank accounts, while the figure is 100% in other countries.

Explaining why bank share prices have been decreasing over the last three months, Mr Scriven said that the profuse supply of ‘commodities’ had made bank shares less attractive. Several banks’ IPOs slated for the third and fourth quarters of the year will certainly lead to the oversupply of bank shares.

Meanwhile, banks now have to cope with a lot of difficulties caused by the high inflation. As the central bank has required higher compulsory reserve ratio for bank deposits, commercial banks now have to pay higher costs for capital mobilisation.

Johan Nyvene, Director of HCM City Securities Company, also thinks that banking remains the good and safe choice for investors. However, he stressed that not all bank share items would recover. Only the banks which have big scale and good business performance will be able to attract investors. He said that investors should learn carefully about banks before deciding to inject money in them, and avoid investments in banks that may be merged with others.

Experts said that a new price level for bank shares would be set up after Vietcombank fulfilled its IPO. However, it remains unclear when Vietcombank’s IPO will take place. It is very likely that the bank’s IPO, previously slated for August, will be delayed due to the falls on the market.

Experts have said that if Vietcombank’s shares are highly valuated, the prices of other bank shares items will bounce back, and vice versa. Investors, both foreign and domestic, institutions and individuals, have gathered big sums of money to inject in Vietcombank shares when the bank’s shares hit the market.

Source: VNE