Slackening IPOs to harmonise the market

The number of new accounts at securities companies has been increasing rapidly, while foreign investment funds are queuing to enter Vietnam. Meanwhile, the stock market remains gloomy, why? Vu Thanh Tu Anh, Director of Research at the Fulbright Economics Teaching Programme in Vietnam, talked about this.


What would you say about the two contradictory factors, which may be called a paradox?

In fact, the two factors do not conflict. People can make investment when the market rises and make investment when the market falls as well.

You may see that many foreign investors, though having entered Vietnam, have just made initial preparatory works, while they have not made big investment deals. The right time for them to make investment activities remains in their thoughts.

I think that one of the reasons that have prompted investors to come to Vietnam at this moment is that they are awaiting upcoming share issuances. As you may know, a lot of big Vietnamese enterprises will make IPOs in the coming months, while several hundred other enterprises will complete equitisation with the total capital of up to several hundred thousand billion dong.

It is very difficult to estimate the total amount of capital foreign investors are going to inject in Vietnam, but I know for sure that the volume is not small. Investors have opportunities and are thinking of how to grasp the opportunities. They act rationally, not by feeling.


There are two contradictory opinions about the IPOs by big general corporations scheduled for the end of the year. What is your opinion about this?

Some experts have said that the market is now in ‘indigestion’. However, in order to know if the market is oversupplied, we should measure its capability of absorbing capital from the market.

With the high capability of foreign investors that we have mentioned before, and the big capital sums of domestic investors, I think that the market still can absorb the capital to be brought about by the big IPOs and the equitisations in the last months of the year.

I think what we see now on the market is ‘expectation’ rather than ‘indigestion’.

An important issue we should discuss is at what prices the market will absorb the IPOs.

If the state aims to optimise the turnover from equitisation, it should re-time the dates and the roadmaps for equitisation and IPOs.

In this case, I think, it is quite normal to make changes suitable to the market’s circumstances, since IPOs and equitisations themselves are kinds of market activities.


Could you please tell us more about this?

A couple of weeks ago, the government and the State Securities Commission suggested that companies and banks reconsider the timing of their IPOs. The move showed that the government was trying to make an adjustment to harmonise the roadmap of big corporations’ IPOs.

If the IPOs are still be carried out as they were previously planned, the scenario will be as follows. Foreign investors now seem to be delaying their investment deals to wait for the IPOs. If the state still follows the planned roadmap, supply will sharply increase, thus dropping prices, which can help the investors successfully buy shares at prices lower than the levels they should have.

If this happens, the money the state will collect from IPOs will be lower. If the market still cannot absorb the securities to be issued even with the low prices of shares, the state may have to reconsider raising the maximum foreign ownership ratio in local joint stock companies. And this is exactly what foreign investors want. They have even put pressure on the government. (The maximum foreign ownership is 49% of total shares in listed companies and 30% in banks).

In general, if the state tries to maintain the previous IPO plan, it would still bear hard pressure which may force it to make further adjustments. I mean that if it does not re-time the IPOs now, it will still have to do that later. Because so, it would be better to make the adjustment right now.

Source: VNE