Foreign investors are scrambling to purchase shares of companies in which the room for foreign investors is nearly run out, despite the fact that the PE indexes of these companies remain relatively high.
The information about the changes in foreign ownership ratio in AGF (down from 49% to 45%) after the issuance of additional shares has given foreign investors the opportunity to buy more AGF. The AGF purchased volume accounts for 50-80% of total transaction volume of this share item.
Similarly, after the foreign ownership ratio reduced as a result of the issuance of additional shares in order to raise the chartered capital to VND545bil, foreign investors rushed to buy SAM. Just several days ago, the mistake by a securities depository centre in defining the foreign ownership ratio in Sacombank has given foreign investors a gift: they could buy a lot of STB due to the mistake.
In fact, share items that foreign investors are rushing to buy are the ones of the companies operating in profitable fields, including banking (which has the impressive growth rate of 40-45% per annum), seafood (30%), real estate, seaports, infrastructure and telecommunications.
Though the PE indexes of these companies are relatively high, at 30-40, the share items remain attractive in the eyes of investors as the issuance companies all gain the growth rate of 30-40% per annum. Experts said that with the growth rate of 30-40% per annum, the acceptable PE index would be 30 or 40, since the price increases can be offset by the rapid growth rate in profit of the listing companies.
In fact, experts said that share prices had been decreasing considerably and were now at ‘acceptable’ levels. By the end of August, BT6 had lost 30% in value, GMD 42%, REE 32%, and STB 50% compared to their highest price levels.
Investors have thought that the demand for securities was very low in the ‘correction’ period of the market. However, what happened on the market showed the reverse result. The fact that foreign investors hunted for blue chips and the share items with little room showed that the investors’ interests in key share items remained very high.
To date, it remains unclear about the possibility of more room being offered to foreign investors. The Ministry of Planning and Investment is drawing up a decree on the implementation of WTO commitments in foreign direct investment. Once the decree is drawn up, the list of investment fields with investment limitations or preferences will be clearer.
Showing posts with label Securities. Show all posts
Showing posts with label Securities. Show all posts
Wednesday, September 05, 2007
Friday, August 31, 2007
Power Company joins hand with securities firm
Power Company No. 1 and Ha Thanh Securities signed a comprehensive strategic cooperation agreement on Aug. 30.
Under the agreement, the power company will contribute capital to Ha Thanh Securities, while Ha Thanh is expected to pour capital in power transmission, real estate and finance services projects invested by Power company No. 1.
Ha Thanh will become a partner in providing outline consultation for equitisation, share issuance, shareholder management and other services as the power company carries out its equitisation.
The power company will work with Ha Thanh to open transaction units and stock order agents at the power company’s several locations.
The General Director of Electricity of Viet Nam (EVN), Pham Le Thanh, said that the agreement aimed to fully utilise the two companies’ potential.
Cooperation enhancement between Ha Thanh Securities and Power Company No. 1 is regarded as the first step in the development of EVN’s multi-sectoral economic growth.
Source: VNA
Under the agreement, the power company will contribute capital to Ha Thanh Securities, while Ha Thanh is expected to pour capital in power transmission, real estate and finance services projects invested by Power company No. 1.
Ha Thanh will become a partner in providing outline consultation for equitisation, share issuance, shareholder management and other services as the power company carries out its equitisation.
The power company will work with Ha Thanh to open transaction units and stock order agents at the power company’s several locations.
The General Director of Electricity of Viet Nam (EVN), Pham Le Thanh, said that the agreement aimed to fully utilise the two companies’ potential.
Cooperation enhancement between Ha Thanh Securities and Power Company No. 1 is regarded as the first step in the development of EVN’s multi-sectoral economic growth.
Source: VNA
It’s time to buy shares
The Hong Kong and Shanghai Banking Corporation (HSBC) has released a new report in a series of reports about Vietnam’s national economy and financial market.
In the report, HSBC’s experts advise investors to buy Vietnamese stocks at this moment.
At the end of January 2007, HSBC gave the forecast that the VN Index would stand at the 900 point level by the end of this year, and the forecast was repeated in its latest report. After declining by 25% after hitting its peak in March, the VN Index has come back to the forecast level, making share items on the bourse become attractive – once again.
Vietnam’s national economy maintains high growth rates, 8.1% in the second quarter of 2007, while the foreign direct investment (FDI) keeps flowing into Vietnam in big quantities ($6.7bil to date, much higher than last year’s level of $2.8bil). Vietnam’s export growth rate is at 19%.
Meanwhile, the growth rate of the profit of listing companies proves to be very satisfactory. The net profit of the 12 companies which own the 12 blue chips saw the impressive growth rate of 83% in the first half of the year. Some of them saw profit double or triple that of the same period last year.
However, the report reminded investors that the high profit of the listing companies came from financial investment deals. Vinamilk (the Vietnam Dairy Products Company), for example, would have gained the net profit of 23% instead of 36% if it had not made financial investments.
As many companies have issued additional shares, the EPS proves to be much lower than the net profit growth rate. Anyway, the EPS in the first half of the year still grew by 35% over the same period of last year.
Investment fund management companies in Vietnam share the same view that EPS growth rate will be between 22% and 25% this year, and 15-20% in 2008. Meanwhile, the EPS growth rate of Indian companies is expected to be 9% this year and 20% next year. The figures are 15% and 19% for Chinese companies, respectively, and 19% and 11% for Malaysian companies. Therefore, investors may see that the EPS growth rate for Vietnamese companies is relatively attractive.
The prices of the stocks on Vietnam’s bourse are believed to have returned to the actual values. In March, when the market was very hot, the P/E was 37, and now it has fallen to 31. If considering that the EPS growth rate is 25% this year and 15% the next year, the P/E of 2008 would be 20.
Though share prices prove to be not so cheap, HSBC still believes that the current price levels are close to the actual values. According to HSBC, the VN Index is likely to reach the 1,100 point level by the end of 2008.
Until now, Vietnam has not born impacts of the world’s stock market crisis. The majority of foreign currencies on Vietnam’s market come from domestic funds, which do not have plans to sell.
In fact, only a small part of the total capital of foreign investment funds has been injected in the market. Funds are still holding onto capital, waiting for the share issuances in the last six months of the year. HSBV thinks that some $3bil more remains undisbursed. Once the VN Index is around the 900 point level, which foreign investors think is close to the actual value, the capital will be pumped into the market.
This explains the recovery of Vietnam’s stock market in the context of the world’s gloomy market. While Asian markets have witnessed sharp falls of 18% between July 24 and August 17, Vietnam’s saw the slight decrease of 9.6%, the lowest decrease among Asian markets.
Nevertheless, HSBC has warned that Vietnam’s stock market will be influenced if the world’s market continues fluctuating.
HSBC does not share the same viewpoint as Vietnamese officials that massive IPOs, slated for the remaining months of the year, will cause indigestion in the market due to oversupply. HSBC thinks that demand will increase when there is supply, saying that the IPOs may serve as a catalyst for the recovery of the market.
Source: VNE
In the report, HSBC’s experts advise investors to buy Vietnamese stocks at this moment.
At the end of January 2007, HSBC gave the forecast that the VN Index would stand at the 900 point level by the end of this year, and the forecast was repeated in its latest report. After declining by 25% after hitting its peak in March, the VN Index has come back to the forecast level, making share items on the bourse become attractive – once again.
Vietnam’s national economy maintains high growth rates, 8.1% in the second quarter of 2007, while the foreign direct investment (FDI) keeps flowing into Vietnam in big quantities ($6.7bil to date, much higher than last year’s level of $2.8bil). Vietnam’s export growth rate is at 19%.
Meanwhile, the growth rate of the profit of listing companies proves to be very satisfactory. The net profit of the 12 companies which own the 12 blue chips saw the impressive growth rate of 83% in the first half of the year. Some of them saw profit double or triple that of the same period last year.
However, the report reminded investors that the high profit of the listing companies came from financial investment deals. Vinamilk (the Vietnam Dairy Products Company), for example, would have gained the net profit of 23% instead of 36% if it had not made financial investments.
As many companies have issued additional shares, the EPS proves to be much lower than the net profit growth rate. Anyway, the EPS in the first half of the year still grew by 35% over the same period of last year.
Investment fund management companies in Vietnam share the same view that EPS growth rate will be between 22% and 25% this year, and 15-20% in 2008. Meanwhile, the EPS growth rate of Indian companies is expected to be 9% this year and 20% next year. The figures are 15% and 19% for Chinese companies, respectively, and 19% and 11% for Malaysian companies. Therefore, investors may see that the EPS growth rate for Vietnamese companies is relatively attractive.
The prices of the stocks on Vietnam’s bourse are believed to have returned to the actual values. In March, when the market was very hot, the P/E was 37, and now it has fallen to 31. If considering that the EPS growth rate is 25% this year and 15% the next year, the P/E of 2008 would be 20.
Though share prices prove to be not so cheap, HSBC still believes that the current price levels are close to the actual values. According to HSBC, the VN Index is likely to reach the 1,100 point level by the end of 2008.
Until now, Vietnam has not born impacts of the world’s stock market crisis. The majority of foreign currencies on Vietnam’s market come from domestic funds, which do not have plans to sell.
In fact, only a small part of the total capital of foreign investment funds has been injected in the market. Funds are still holding onto capital, waiting for the share issuances in the last six months of the year. HSBV thinks that some $3bil more remains undisbursed. Once the VN Index is around the 900 point level, which foreign investors think is close to the actual value, the capital will be pumped into the market.
This explains the recovery of Vietnam’s stock market in the context of the world’s gloomy market. While Asian markets have witnessed sharp falls of 18% between July 24 and August 17, Vietnam’s saw the slight decrease of 9.6%, the lowest decrease among Asian markets.
Nevertheless, HSBC has warned that Vietnam’s stock market will be influenced if the world’s market continues fluctuating.
HSBC does not share the same viewpoint as Vietnamese officials that massive IPOs, slated for the remaining months of the year, will cause indigestion in the market due to oversupply. HSBC thinks that demand will increase when there is supply, saying that the IPOs may serve as a catalyst for the recovery of the market.
Source: VNE
What’s the fate of 6 blue chips on HOSE?
Having the total capitalisation volume of VND120tril ($7.5bil), six share items, SJS, STB, FPT, VNM, PPC, and PVD, now account for one-third of the total listing market capitalisation.
Domestic and foreign investors always refer to the prices of the six blue chips when making investment decisions, considering these the barometer of the stock market.
Several days ago, foreign investors were given an unexpected gift: as the securities depository centre made a mistake in defining the foreign ownership ratio in Sacombank, foreign investors could freely purchase many more Sacombank shares. Though the depository centre announced its mistake, foreign investors decided not to sell Sacombank shares in order to reduce the foreign ownership ratio to 30% as required. The event shows the big attractiveness of Sacombank shares (STB).
In the last trading sessions, STB has led the market in transaction volume. However, as the market remains quiet, STB’s price did not increase, selling at VND53,000/share on August 28.
According to Bui Ngoc Tuoc, a securities expert, though STB has high liquidity and low P/E index, it has several shortcomings that may worry investors.
First, STB have been listed in the largest quantity on the market with listed 442mil, many of which have been additionally issued, and at the moments when the demand was lower than supply.
Second, STB has witnessed a lot of changes in staff, while members of management board and their relatives have continuously sold STB recently.
Third, investors still want to keep the ‘wait-and-see’ attitude as they want to know how Sacombank will perform when many foreign banks enter the market and more local banks are set up.
Mr Tuoc said that if the shortcomings could be fixed, STB would still deserve to be listed among investors’ portfolios.
Once the hottest share item on the bourse, SJS has surrendered its first position to another item though it remains influential. When Song Da Corporation (the parent group of SJS) sold 6mil SJS shares, big doubts were left among investors.
Vu Chi Tung, an investor on SSI trading floor, said that this was one of the factors that had prompted him and other investors not to keep SJS any more. “Song Da would not have sold SJS in large quantities if SJS had been actually promising,” he said.
The director of a securities company said that SJS would have difficulty retaining its previous position as the real estate boom was over. Meanwhile, several other real estate firms, which also have big competitiveness, are also going to make IPOs or list on the bourse.
The director said that the actual value of SJS would be somewhere between VND200-250,000/share. If the real estate market does not witness a new price fever, and the company does not have business plans which promise fat profit, SJS will not be able to return to the over VND300,000/share level.
Recently, Vinamilk (VNM) has revealed its intention of listing on a foreign bourse. Together with STB, VNM is a big name among the six blue chips most wanted by investors. If the government approves the raising of foreign ownership ratio, and VNM lists on foreign bourses, VNM price will skyrocket. However, there is always a big gap between expectations and reality.
FPT prices slid dramatically recently from their highest peak. Three reasons have been cited to explain the sharp price decreases 1. bad rumours about FPT, which were not addressed timely 2. TPG registered to sell a large quantity of FPT 3. Two members of FPT registered to sell a large volume of FPT also at that time. Whether FPT prices can recover in the time to come will depend on many factors, while FPT’s management board has committed not to sell shares until the year’s end.
PPC, though having the lowest P/E index among the group of six (less than 17), has the lowest price level, at VND52,500/share.
The paradox has been explained by Electricity Engineer Tran Vinh Nghi: outdated equipment and low management skills both make PPC’s value low.
Meanwhile, PVD has overly high P/E (over 74), while the new projects of the company have not shown efficiency; therefore, investors dare not inject mooney in PVD. Moreover, if wanting to make investment in oil and gas companies, investors will have more choices in the near future, when more oil and gas enterprises are equitised.
Domestic and foreign investors always refer to the prices of the six blue chips when making investment decisions, considering these the barometer of the stock market.
Several days ago, foreign investors were given an unexpected gift: as the securities depository centre made a mistake in defining the foreign ownership ratio in Sacombank, foreign investors could freely purchase many more Sacombank shares. Though the depository centre announced its mistake, foreign investors decided not to sell Sacombank shares in order to reduce the foreign ownership ratio to 30% as required. The event shows the big attractiveness of Sacombank shares (STB).
In the last trading sessions, STB has led the market in transaction volume. However, as the market remains quiet, STB’s price did not increase, selling at VND53,000/share on August 28.
According to Bui Ngoc Tuoc, a securities expert, though STB has high liquidity and low P/E index, it has several shortcomings that may worry investors.
First, STB have been listed in the largest quantity on the market with listed 442mil, many of which have been additionally issued, and at the moments when the demand was lower than supply.
Second, STB has witnessed a lot of changes in staff, while members of management board and their relatives have continuously sold STB recently.
Third, investors still want to keep the ‘wait-and-see’ attitude as they want to know how Sacombank will perform when many foreign banks enter the market and more local banks are set up.
Mr Tuoc said that if the shortcomings could be fixed, STB would still deserve to be listed among investors’ portfolios.
Once the hottest share item on the bourse, SJS has surrendered its first position to another item though it remains influential. When Song Da Corporation (the parent group of SJS) sold 6mil SJS shares, big doubts were left among investors.
Vu Chi Tung, an investor on SSI trading floor, said that this was one of the factors that had prompted him and other investors not to keep SJS any more. “Song Da would not have sold SJS in large quantities if SJS had been actually promising,” he said.
The director of a securities company said that SJS would have difficulty retaining its previous position as the real estate boom was over. Meanwhile, several other real estate firms, which also have big competitiveness, are also going to make IPOs or list on the bourse.
The director said that the actual value of SJS would be somewhere between VND200-250,000/share. If the real estate market does not witness a new price fever, and the company does not have business plans which promise fat profit, SJS will not be able to return to the over VND300,000/share level.
Recently, Vinamilk (VNM) has revealed its intention of listing on a foreign bourse. Together with STB, VNM is a big name among the six blue chips most wanted by investors. If the government approves the raising of foreign ownership ratio, and VNM lists on foreign bourses, VNM price will skyrocket. However, there is always a big gap between expectations and reality.
FPT prices slid dramatically recently from their highest peak. Three reasons have been cited to explain the sharp price decreases 1. bad rumours about FPT, which were not addressed timely 2. TPG registered to sell a large quantity of FPT 3. Two members of FPT registered to sell a large volume of FPT also at that time. Whether FPT prices can recover in the time to come will depend on many factors, while FPT’s management board has committed not to sell shares until the year’s end.
PPC, though having the lowest P/E index among the group of six (less than 17), has the lowest price level, at VND52,500/share.
The paradox has been explained by Electricity Engineer Tran Vinh Nghi: outdated equipment and low management skills both make PPC’s value low.
Meanwhile, PVD has overly high P/E (over 74), while the new projects of the company have not shown efficiency; therefore, investors dare not inject mooney in PVD. Moreover, if wanting to make investment in oil and gas companies, investors will have more choices in the near future, when more oil and gas enterprises are equitised.
Thursday, August 30, 2007
Rule to tighten cap on insurance company shareholding
A draft Ministry of Finance regulation would limit individuals and organisations to holding no more than 10% and 20%, respectively, of insurance company's total equity.
The policy would apply to both domestic and foreign investors, said the ministry.
The limits would help ensure that insurance companies are not dominated by a few major shareholders and would help maintain sustainable development over the long term for newly created insurance companies, said Phung Dac Loc, general secretary of the Viet Nam Insurance Association.
The director of Ernst & Young Viet Nam's business consulting sector, Allanda McConnell, disagreed, saying that the ownership limits would make investment in domestic insurance companies less attractive to foreign investors.
Local players' capacity in terms of technology, management and business strategy is still limited,. McConnell said. The presence of strategic investors with higher stakes in these local companies was a positive solution to these shortcomings.
A 49-per-cent limit, similar to the rate stipulated for foreign individuals and organisations investing in companies listed on the stock market, would be suitable, she suggested.
Currently, there are only some 40 insurers operating on the market. Many foreign insurers are eyeing the market, and many domestic banks were also developing financial group models to expand their businesses into the insurance arena.
The issuance of stricter regulations on the insurance industry has limited the number of new insurance companies, however, with Agribank Insurance Joint Stock Co, established earlier this month, the only new player on the market.
Earlier this year, the Ministry of Finance issued Decree No 46 stipulating that non-life insurance companies have legal capital of at least VND300bil (US$18.75mil), up from the previous VND70bil. Life insurers were required to have capital of VND600bil ($37.5mil), up from VND140bil.
Source: VNE
The policy would apply to both domestic and foreign investors, said the ministry.
The limits would help ensure that insurance companies are not dominated by a few major shareholders and would help maintain sustainable development over the long term for newly created insurance companies, said Phung Dac Loc, general secretary of the Viet Nam Insurance Association.
The director of Ernst & Young Viet Nam's business consulting sector, Allanda McConnell, disagreed, saying that the ownership limits would make investment in domestic insurance companies less attractive to foreign investors.
Local players' capacity in terms of technology, management and business strategy is still limited,. McConnell said. The presence of strategic investors with higher stakes in these local companies was a positive solution to these shortcomings.
A 49-per-cent limit, similar to the rate stipulated for foreign individuals and organisations investing in companies listed on the stock market, would be suitable, she suggested.
Currently, there are only some 40 insurers operating on the market. Many foreign insurers are eyeing the market, and many domestic banks were also developing financial group models to expand their businesses into the insurance arena.
The issuance of stricter regulations on the insurance industry has limited the number of new insurance companies, however, with Agribank Insurance Joint Stock Co, established earlier this month, the only new player on the market.
Earlier this year, the Ministry of Finance issued Decree No 46 stipulating that non-life insurance companies have legal capital of at least VND300bil (US$18.75mil), up from the previous VND70bil. Life insurers were required to have capital of VND600bil ($37.5mil), up from VND140bil.
Source: VNE
Wednesday, August 29, 2007
Banks continue funding securities investments
While many joint stock banks have announced ceasing loaning to securities investors, other banks are trying to push up this operation, which proves to bring high profit.
SeABank Hanoi, for example, on August 20 announced that it would cooperate with SeABank Securities Company, belonging to the bank, to provide loans to securities investors with the mortgages being the securities themselves.
The bank will lend VND50mil at minimum for every deal and for six months. However, the bank requires high interest rates on the loans. For example, the interest rate for a six-month term loan is 1.1% per month. In case investors want to extend the loans, they would have to pay 1.32% per month. The borrowers will have to pay 1.65% a month for overdue debts. Moreover, they have to pay VND200,000 per deal for the so-called ‘credit management fee’.
The mortgage assets for the loans will be the securities items to be selected by SeABS, which are being listed on HCM City Stock Exchange (HOSE) and Hanoi Securities Trading Centre (HASTC). The market value of the mortgaged securities items will be the average closing price of the latest trading sessions. Borrowers are allowed to sell mortgaged securities, and right after the sale, they have to pay debts to the bank.
The Bank for Agriculture and Rural Development (Agribank) HCM City Branch has also signed contracts with Agribank Securities Company and Au Viet Securities Company to provide loans to stock investors. With Agribank, clients are allowed to borrow sums of money equivalent to 50% of shares’ value, and for 12 months at maximum.
It is said that Vietcombank and other state-owned banks, which have a percentage of loans for securities investments below the ceiling level of 3% of total outstanding loans, are trying to attract clients – securities investors – though they announced before that they would not pay much attention to this operation.
Loaning for securities investments proves to be a profitable business, and it is understandable why no joint stock bank refuses funding stock investment deals. These loans have been accounting for 10-40% of total outstanding loans of commercial banks.
The central bank has tried to limit the loaning for securities investments by issuing Instruction No 3, requesting banks to lower their outstanding loans for stock investments to less than 3% of banks’ total outstanding loans. The deadline for the implementation of the decision is December 31, 2007.
Source: VNE
SeABank Hanoi, for example, on August 20 announced that it would cooperate with SeABank Securities Company, belonging to the bank, to provide loans to securities investors with the mortgages being the securities themselves.
The bank will lend VND50mil at minimum for every deal and for six months. However, the bank requires high interest rates on the loans. For example, the interest rate for a six-month term loan is 1.1% per month. In case investors want to extend the loans, they would have to pay 1.32% per month. The borrowers will have to pay 1.65% a month for overdue debts. Moreover, they have to pay VND200,000 per deal for the so-called ‘credit management fee’.
The mortgage assets for the loans will be the securities items to be selected by SeABS, which are being listed on HCM City Stock Exchange (HOSE) and Hanoi Securities Trading Centre (HASTC). The market value of the mortgaged securities items will be the average closing price of the latest trading sessions. Borrowers are allowed to sell mortgaged securities, and right after the sale, they have to pay debts to the bank.
The Bank for Agriculture and Rural Development (Agribank) HCM City Branch has also signed contracts with Agribank Securities Company and Au Viet Securities Company to provide loans to stock investors. With Agribank, clients are allowed to borrow sums of money equivalent to 50% of shares’ value, and for 12 months at maximum.
It is said that Vietcombank and other state-owned banks, which have a percentage of loans for securities investments below the ceiling level of 3% of total outstanding loans, are trying to attract clients – securities investors – though they announced before that they would not pay much attention to this operation.
Loaning for securities investments proves to be a profitable business, and it is understandable why no joint stock bank refuses funding stock investment deals. These loans have been accounting for 10-40% of total outstanding loans of commercial banks.
The central bank has tried to limit the loaning for securities investments by issuing Instruction No 3, requesting banks to lower their outstanding loans for stock investments to less than 3% of banks’ total outstanding loans. The deadline for the implementation of the decision is December 31, 2007.
Source: VNE
SSC to have information about ATIP shares checked
The State Securities Commission (SSC) has promised to have the information about ATIP (ATI Petroleum) shares clarified after the government on August 8, 2007 requested that the Ministry of Finance and SSC provide faithful information about ATIP to investors.
According to SSC, ATIP is a foreign enterprise, established and now operating in Nevada state in the US. On July 4, 2001, ATIP got an investment licence from the Ministry of Planning and Investment for a joint venture project with PetroVietnam under the mode of PSC (production sharing contract) on exploring, developing and producing oil and gas at block No 102 and 106 on Vietnam’s continental shelf. Later, ATIP sold a part of the joint venture to Malaysia’s Petronas, and now ATIP holds 10% of total shares in the joint venture.
On January 26, 2007, Chairman of ATIP signed Decision No 01/QD on internal share issuance to 93 staffs. After buying ATIP shares, the staffs sold the shares to outside investors, and the shares have been available on the market.
SSC has checked information about the shareholders and found out that as of March 12, 2007, the number of investors who held ATIP shares was 251.
Recently, mass media have reported that ATIP shares are being listed on NYSE – Euronext, and that ATIP promised to give 10,000 ATIP shares as bonus to the national soccer squad.
The Securities Law, Enterprise Law and current guiding documents do not mention the fact that 100% foreign owned companies, established and operating in other countries, can offer shares for sale in Vietnam. However, in fact, ATIP shares have been transferred to 250 investors in Vietnam.
In order to protect the benefit of Vietnamese investors and avoid possible risks, SSC has two times asked ATIP to expose information about capital and financial situation, business performance and operation regulations of ATIP, as well as the transactions on NYSE – Euronext.
However, ATIP had not provided necessary information by August 10, 2007, except Dispatch No 10 to SSC dated August 10, 2007, saying that the company was preparing necessary documents. As the chairman of ATIP was away on business and would return in mid August, the company promised to gather all necessary documents and give explanations to the questions put by SSC at that time.
On August 17, 2007, ATIP sent a document to SSC, providing some details about the interested issues relating to the listing of ATIP on NYSE – Euronext. SSC thinks that it still needs to check the information before making it public; therefore, it plans to have a working session with ATIP to discuss related issues
Prior to that, SSC took an inspection tour of ATIP. The company organised workshops introducing its operation activities.
Source: VNE
According to SSC, ATIP is a foreign enterprise, established and now operating in Nevada state in the US. On July 4, 2001, ATIP got an investment licence from the Ministry of Planning and Investment for a joint venture project with PetroVietnam under the mode of PSC (production sharing contract) on exploring, developing and producing oil and gas at block No 102 and 106 on Vietnam’s continental shelf. Later, ATIP sold a part of the joint venture to Malaysia’s Petronas, and now ATIP holds 10% of total shares in the joint venture.
On January 26, 2007, Chairman of ATIP signed Decision No 01/QD on internal share issuance to 93 staffs. After buying ATIP shares, the staffs sold the shares to outside investors, and the shares have been available on the market.
SSC has checked information about the shareholders and found out that as of March 12, 2007, the number of investors who held ATIP shares was 251.
Recently, mass media have reported that ATIP shares are being listed on NYSE – Euronext, and that ATIP promised to give 10,000 ATIP shares as bonus to the national soccer squad.
The Securities Law, Enterprise Law and current guiding documents do not mention the fact that 100% foreign owned companies, established and operating in other countries, can offer shares for sale in Vietnam. However, in fact, ATIP shares have been transferred to 250 investors in Vietnam.
In order to protect the benefit of Vietnamese investors and avoid possible risks, SSC has two times asked ATIP to expose information about capital and financial situation, business performance and operation regulations of ATIP, as well as the transactions on NYSE – Euronext.
However, ATIP had not provided necessary information by August 10, 2007, except Dispatch No 10 to SSC dated August 10, 2007, saying that the company was preparing necessary documents. As the chairman of ATIP was away on business and would return in mid August, the company promised to gather all necessary documents and give explanations to the questions put by SSC at that time.
On August 17, 2007, ATIP sent a document to SSC, providing some details about the interested issues relating to the listing of ATIP on NYSE – Euronext. SSC thinks that it still needs to check the information before making it public; therefore, it plans to have a working session with ATIP to discuss related issues
Prior to that, SSC took an inspection tour of ATIP. The company organised workshops introducing its operation activities.
Source: VNE
Wednesday, August 22, 2007
Stock market awaiting new investment funds
Experts believe that the current gloomy stock market will become brighter if more investment funds enter Vietnam, calming down domestic investors and raising the securities demand. However, management companies seem to be continuing to wait for their time.
Twelve investment fund management companies were established in 2006. However, only the Hanoi Fund Management Company (HFM) announced the setting up of its VND200bil ($12.5mil) fund – Hanoi Fund. Other companies have not made any move.
The State Securities Commission (SSC) thinks that the best solution to the current gloomy stock market is to develop institutional investors, including investment funds. Meanwhile, only one fund, set up by Manulife, has got the approval from SSC to raise funds worth VND250bil ($15.62mil).
Experts guess that only several management companies will have their funds debut this year. HFM is preparing for the establishment of two new funds, the domestic one with VND500bil ($31.25mil) in capital, and the foreign one with the expected capital of $50-100mil. The funds will aim at both listed and unlisted securities and IPOs. Hanoi Fund, another fund managed by HFM, saw the net asset growth of 70% by the end of June 2007. The dividend HFM plans to give to the investors may reach 30% this year.
Another fund, to be managed by Viet Long Fund Management Company, is expected to be ‘given birth’ to in some days, and is believed to have the capital of VND300bil ($18.75mil).
According to Nguyen Thuc Vinh, Director General of Viet Long Fund Management Company, as the market keeps falling, investors have become hesitant with their investment deals. However, it would be quite different for investment funds, which always aim at long-term investment strategy.
“It is the right time to make disbursement now. I believe that the stock market will see vigorous development in the next five years,” said Mr Vinh.
Saigon Securities Incorporated (SSI) has just set up a fund management company; however, the company has been well preparing its plan to set up a fund. SSI has announced it will set up the fund right in 2007, but has not revealed the scale and the operational time.
Sources said that the Ban Viet Management Company was also moving ahead with its plan to establish a $150mil fund. The Vietnam Fund Management Company is raising funds to set up the VND300bil ($18.75mil) VF2.
Management companies are still trying to set up new funds, though they know well about the difficulties existing funds are facing. The price of VF1 certificate (being managed by the Vietnam Fund Management Company), for example, is now 20% lower than the net value asset NAV. The price of Prudential Management Company’s certificate is just around the face value, while Manulife fund management company is trying hard to raise funds.
Nevertheless, a lot of other management companies seem to be not hurrying with plans to set up funds. It is partially because of the market’s fall. Moreover, experts said, the strict regulations stipulated by the Securities Law have also prompted management companies to delay their plans on setting up funds. These companies now focus on doing business themselves, and doing authorised business.
Under the current regulations, two years after their establishment, management companies can establish member funds (minimum contributed capital VND50bil or $3.12mil, 50 members at least, capital contributors must be legal entities, state owned enterprises are not allowed to make capital contribution with state owned capital).
Source: VNE
Twelve investment fund management companies were established in 2006. However, only the Hanoi Fund Management Company (HFM) announced the setting up of its VND200bil ($12.5mil) fund – Hanoi Fund. Other companies have not made any move.
The State Securities Commission (SSC) thinks that the best solution to the current gloomy stock market is to develop institutional investors, including investment funds. Meanwhile, only one fund, set up by Manulife, has got the approval from SSC to raise funds worth VND250bil ($15.62mil).
Experts guess that only several management companies will have their funds debut this year. HFM is preparing for the establishment of two new funds, the domestic one with VND500bil ($31.25mil) in capital, and the foreign one with the expected capital of $50-100mil. The funds will aim at both listed and unlisted securities and IPOs. Hanoi Fund, another fund managed by HFM, saw the net asset growth of 70% by the end of June 2007. The dividend HFM plans to give to the investors may reach 30% this year.
Another fund, to be managed by Viet Long Fund Management Company, is expected to be ‘given birth’ to in some days, and is believed to have the capital of VND300bil ($18.75mil).
According to Nguyen Thuc Vinh, Director General of Viet Long Fund Management Company, as the market keeps falling, investors have become hesitant with their investment deals. However, it would be quite different for investment funds, which always aim at long-term investment strategy.
“It is the right time to make disbursement now. I believe that the stock market will see vigorous development in the next five years,” said Mr Vinh.
Saigon Securities Incorporated (SSI) has just set up a fund management company; however, the company has been well preparing its plan to set up a fund. SSI has announced it will set up the fund right in 2007, but has not revealed the scale and the operational time.
Sources said that the Ban Viet Management Company was also moving ahead with its plan to establish a $150mil fund. The Vietnam Fund Management Company is raising funds to set up the VND300bil ($18.75mil) VF2.
Management companies are still trying to set up new funds, though they know well about the difficulties existing funds are facing. The price of VF1 certificate (being managed by the Vietnam Fund Management Company), for example, is now 20% lower than the net value asset NAV. The price of Prudential Management Company’s certificate is just around the face value, while Manulife fund management company is trying hard to raise funds.
Nevertheless, a lot of other management companies seem to be not hurrying with plans to set up funds. It is partially because of the market’s fall. Moreover, experts said, the strict regulations stipulated by the Securities Law have also prompted management companies to delay their plans on setting up funds. These companies now focus on doing business themselves, and doing authorised business.
Under the current regulations, two years after their establishment, management companies can establish member funds (minimum contributed capital VND50bil or $3.12mil, 50 members at least, capital contributors must be legal entities, state owned enterprises are not allowed to make capital contribution with state owned capital).
Source: VNE
Market gloomy, idle capital has nowhere to go
The stock market has fallen, bank deposits bring low interest rates, the real estate market remains frozen: investors do not know where to inject their idle money.
It proves to be quite difficult for investors to earn money at this moment. They cannot inject money in stocks any more as the market has been falling for the last three months. Prices of blue chips have decreased by 30-40% compared to March.
Le Dat Chi, Lecturer at the HCM City Economics University, who is also an investor, said that people should not inject money in stocks at this moment. He said that the market had been distorted by some ‘powerful forces’, while investors’ confidence has been lost due to a series of violations by securities companies (15 violation cases have been discovered so far this year).
Mr Chi said that investors should wait until the market bounced back and was on the right track, and for the time being, investors should turn to bank deposits as the safest investment channel.
Experts also said that when the real estate remained frozen and the gold market was risky, the best choice was to make deposits at banks.
However, the advice does not satisfy investors as the low interest rates offered by banks do not bring investors desired profit. In fact, the interest rates have been lowered by 10-20% compared to the end of July, despite the high inflation rate in the last seven months.
Some 10 commercial banks have announced they will lower the interest rates on VND deposits by 0.36%-0.6% per annum, commencing from August. If depositing VND100mil now, depositors will lose VND205,000-281,000 every month due to the decreased interest rates.
Investors have also been advised to inject money in government bonds, a simple investment channel with zero risk.
No investment channel can be seen as optimal nowadays, and if investors make investments in government bonds, buy gold or dollars, or make deposits at banks, they just aim to save their money and wait for their opportunities.
Source: VNE
It proves to be quite difficult for investors to earn money at this moment. They cannot inject money in stocks any more as the market has been falling for the last three months. Prices of blue chips have decreased by 30-40% compared to March.
Le Dat Chi, Lecturer at the HCM City Economics University, who is also an investor, said that people should not inject money in stocks at this moment. He said that the market had been distorted by some ‘powerful forces’, while investors’ confidence has been lost due to a series of violations by securities companies (15 violation cases have been discovered so far this year).
Mr Chi said that investors should wait until the market bounced back and was on the right track, and for the time being, investors should turn to bank deposits as the safest investment channel.
Experts also said that when the real estate remained frozen and the gold market was risky, the best choice was to make deposits at banks.
However, the advice does not satisfy investors as the low interest rates offered by banks do not bring investors desired profit. In fact, the interest rates have been lowered by 10-20% compared to the end of July, despite the high inflation rate in the last seven months.
Some 10 commercial banks have announced they will lower the interest rates on VND deposits by 0.36%-0.6% per annum, commencing from August. If depositing VND100mil now, depositors will lose VND205,000-281,000 every month due to the decreased interest rates.
Investors have also been advised to inject money in government bonds, a simple investment channel with zero risk.
No investment channel can be seen as optimal nowadays, and if investors make investments in government bonds, buy gold or dollars, or make deposits at banks, they just aim to save their money and wait for their opportunities.
Source: VNE
Monday, August 20, 2007
IPOs go from dazzling to duds during lengthy market downturn
Now may not be the best time to hold an initial public offering (IPO) or issue additional shares given recent stock failures as the securities market heads further into chaos.
For example, Song Da Industrial Zone and Urban Development and Investment JSC attempted to auction six million additional shares on the Ho Chi Minh City Stock Exchange (HOSE) on August 10 at an initial price of VND235,000 a piece.
Only 26 investors - 22 retail and four institutional buyers - ordered a minuscule 489,600 shares, leaving over five million unsold.
"The current situation [with regard to securities listings] is understandable given the stock market has cooled since the end of last year and investors are no longer as hungry for shares," said a Kim Long Securities analyst.
Companies have even been forced to hold secondary auctions attempting to offload unclaimed or abandoned shares.
In early August, Vincom held a secondary bid for 25,000 shares, while PetroVietnam Insurance sold 810,000 shares in a repeat sale after investors refused to buy the stock during its IPO in June.
The biggest embarrassment, though, was Bao Viet - once hailed as the bourse's next blue chip - which sold only 2mil of the 15mil shares up for sale during their secondary auction.
The golden days when thousands of investors use to clamber for IPOs and new shares have passed.
Nguyen Quang Huy, deputy director of Bao Viet Securities, said when the market was hot stock prices surged on the back of investor expectations. As a result, buyers submitted exorbitantly high bids for new shares.
The trend caused a panic among institutional investors who saw stock prices grossly overvalued, and eventually the bourse hit an adjustment phase, with which investors are still trying to cope.
Small market players have since learnt their lesson and are now more cautious in their bidding strategies, said Don Lam, a VinaCapital fund manager.
Given the current state of the market, some investors are even opting to avoid auctions altogether and wait for the stock to begin trading on the exchange.
Hoang Long, an investor with SSI, waited until Royal International shares, which were sold for VND183,000 a piece during its IPO, entered the market. The stock is now around VND141,000.
Analysts attribute the recent abysmal performance of public offerings primarily to monetary tightening and poor consulting services by brokerages.
A Kim Long Securities analyst said the State Bank of Viet Nam policy to cap lending on securities investments to 3% of total outstanding debt among commercial banks has strangled investor access to capital. As a result, many investors simply can not take part in auctions.
"Moreover, investors are repulsed by public offerings due to low liquidity in many shares," the analyst said.
Vu Hoai Chang, head research and investment at SME Securities, also blames a lack of experience among brokerages in rousting investor interest in public offerings and supplying adequate consulting.
"Consultants play a decisive role in the success of an auction," said Chang. "Consulting services help issuers pick suitable times to host IPOs, set reasonable initial prices and often ensure auctions are financially beneficial by buying a certain per cent of the stock if shares go unsold."
Failure to sell all the shares in an auction not only has a psychological impact on the stock but impacts a company's ability to raise capital for necessary investments and expansion projects, said Chang. Companies, therefore, must choose a consultant carefully.
The current problems on the stock exchange, though, will not last forever, and analysts remain upbeat over the fact that investors have become more cautious in bidding during public offerings.
Source: VNE
For example, Song Da Industrial Zone and Urban Development and Investment JSC attempted to auction six million additional shares on the Ho Chi Minh City Stock Exchange (HOSE) on August 10 at an initial price of VND235,000 a piece.
Only 26 investors - 22 retail and four institutional buyers - ordered a minuscule 489,600 shares, leaving over five million unsold.
"The current situation [with regard to securities listings] is understandable given the stock market has cooled since the end of last year and investors are no longer as hungry for shares," said a Kim Long Securities analyst.
Companies have even been forced to hold secondary auctions attempting to offload unclaimed or abandoned shares.
In early August, Vincom held a secondary bid for 25,000 shares, while PetroVietnam Insurance sold 810,000 shares in a repeat sale after investors refused to buy the stock during its IPO in June.
The biggest embarrassment, though, was Bao Viet - once hailed as the bourse's next blue chip - which sold only 2mil of the 15mil shares up for sale during their secondary auction.
The golden days when thousands of investors use to clamber for IPOs and new shares have passed.
Nguyen Quang Huy, deputy director of Bao Viet Securities, said when the market was hot stock prices surged on the back of investor expectations. As a result, buyers submitted exorbitantly high bids for new shares.
The trend caused a panic among institutional investors who saw stock prices grossly overvalued, and eventually the bourse hit an adjustment phase, with which investors are still trying to cope.
Small market players have since learnt their lesson and are now more cautious in their bidding strategies, said Don Lam, a VinaCapital fund manager.
Given the current state of the market, some investors are even opting to avoid auctions altogether and wait for the stock to begin trading on the exchange.
Hoang Long, an investor with SSI, waited until Royal International shares, which were sold for VND183,000 a piece during its IPO, entered the market. The stock is now around VND141,000.
Analysts attribute the recent abysmal performance of public offerings primarily to monetary tightening and poor consulting services by brokerages.
A Kim Long Securities analyst said the State Bank of Viet Nam policy to cap lending on securities investments to 3% of total outstanding debt among commercial banks has strangled investor access to capital. As a result, many investors simply can not take part in auctions.
"Moreover, investors are repulsed by public offerings due to low liquidity in many shares," the analyst said.
Vu Hoai Chang, head research and investment at SME Securities, also blames a lack of experience among brokerages in rousting investor interest in public offerings and supplying adequate consulting.
"Consultants play a decisive role in the success of an auction," said Chang. "Consulting services help issuers pick suitable times to host IPOs, set reasonable initial prices and often ensure auctions are financially beneficial by buying a certain per cent of the stock if shares go unsold."
Failure to sell all the shares in an auction not only has a psychological impact on the stock but impacts a company's ability to raise capital for necessary investments and expansion projects, said Chang. Companies, therefore, must choose a consultant carefully.
The current problems on the stock exchange, though, will not last forever, and analysts remain upbeat over the fact that investors have become more cautious in bidding during public offerings.
Source: VNE
Thursday, August 16, 2007
Foreign investors aren’t leaving Vietnam
CEO and Co-founder of VinaCapital Don Lam, who is also the Chairman of the Vietnam Infrastructure Ltd, has denied the report that foreign investors are trying to withdraw from Vietnam.
Foreign investors have not sold shares in the last three months, they just have not bought them. This is also one of the reasons that made the market fall, Mr Don Lam said, trying to explain the fluctuations in the stock market recently under the view of a foreign investor.
Not long ago, several foreign institutions released reports which forecast the landing of a lot of foreign investment funds in Vietnam which would bring about several billion dollars. However, amid the optimistic reports, Merrill Lynch launched a controversial report, which suggested reducing foreign investment into Vietnam to zero.
Mr Don Lam said that Merrill Lynch released the report as an independent researcher. The institution may think that the stock prices in Vietnam have become overly high and advised its investors not to buy more.
“Foreign investors will absolutely not withdraw from Vietnam’s market,” he said.
It is clear that foreign investment funds are still moving ahead with their plans to march towards Vietnam’s market, which shows positive signs of high economic growth rate. However, a lot of factors, including regulations (foreign investors are allowed to hold up to 30% of total shares in local companies, and the ‘room’ for foreign investors is nearly running out), and the way of accessing investment capital of Vietnam, have kept the huge sums of capital continuing to wait.
According to Mr Don Lam, in general, new foreign investment funds will enter Vietnam after one, two or three years after the establishment. Several professional investors and funds, which have cash for investment, still are not making investments, because they find the stock prices overly expensive. They will make deposits at banks and wait for their opportunities.
In fact, in the last three months, both blue chips and penny stocks on the market were unsalable. Foreign investors did not buy shares in the last time, according to Mr Don Lam, because the P/E index was very high.
“They will buy stocks when prices go down,” Mr Don Lam said.
Regarding the recent unsuccessful auctions, he said that foreign investors offered low prices at the auctions because the stock prices were overly high at this moment. The P/Es of many share items were 30 or 40, and wise investors never accept such a high P/E level.
In fact, foreign investors aim at long-term investment; therefore, they will hold stocks and not sell out for profit.
Mr Don Lam said that the higher foreign ownership ratio in local companies was expected to help stimulate the market again. The market prices of many blue chips, like REE, SIS or VNM, have returned to their actual value after the continuous falls. However, foreigners cannot buy these shares any more because of no room.
Source: VNE
Foreign investors have not sold shares in the last three months, they just have not bought them. This is also one of the reasons that made the market fall, Mr Don Lam said, trying to explain the fluctuations in the stock market recently under the view of a foreign investor.
Not long ago, several foreign institutions released reports which forecast the landing of a lot of foreign investment funds in Vietnam which would bring about several billion dollars. However, amid the optimistic reports, Merrill Lynch launched a controversial report, which suggested reducing foreign investment into Vietnam to zero.
Mr Don Lam said that Merrill Lynch released the report as an independent researcher. The institution may think that the stock prices in Vietnam have become overly high and advised its investors not to buy more.
“Foreign investors will absolutely not withdraw from Vietnam’s market,” he said.
It is clear that foreign investment funds are still moving ahead with their plans to march towards Vietnam’s market, which shows positive signs of high economic growth rate. However, a lot of factors, including regulations (foreign investors are allowed to hold up to 30% of total shares in local companies, and the ‘room’ for foreign investors is nearly running out), and the way of accessing investment capital of Vietnam, have kept the huge sums of capital continuing to wait.
According to Mr Don Lam, in general, new foreign investment funds will enter Vietnam after one, two or three years after the establishment. Several professional investors and funds, which have cash for investment, still are not making investments, because they find the stock prices overly expensive. They will make deposits at banks and wait for their opportunities.
In fact, in the last three months, both blue chips and penny stocks on the market were unsalable. Foreign investors did not buy shares in the last time, according to Mr Don Lam, because the P/E index was very high.
“They will buy stocks when prices go down,” Mr Don Lam said.
Regarding the recent unsuccessful auctions, he said that foreign investors offered low prices at the auctions because the stock prices were overly high at this moment. The P/Es of many share items were 30 or 40, and wise investors never accept such a high P/E level.
In fact, foreign investors aim at long-term investment; therefore, they will hold stocks and not sell out for profit.
Mr Don Lam said that the higher foreign ownership ratio in local companies was expected to help stimulate the market again. The market prices of many blue chips, like REE, SIS or VNM, have returned to their actual value after the continuous falls. However, foreigners cannot buy these shares any more because of no room.
Source: VNE
Wednesday, August 15, 2007
Domestic-made market surveys booming
A lot of market surveys conducted by domestic financial institutions have been released in the last one month.
Investors now have a lot of choices when they want reliable reports and market surveys to refer to before making investment decisions. Besides the reports released by foreign HSBC or Merrill Lynch, they can also seek information and advice in domestic-made reports by SSI, VDSC or BVSC.
SSI’s report hit the market first, called “Vietnam’s stock market: the story about development”. After that, a lot of other reports conducted by other securities firms appeared on the market with different styles and diversified analyses.
In its report, Rong Viet (Viet Dragon VDSC) provides figures showing the overall picture of the economy: GDP growth rate 7.87% in first half of 2007, FDI $5.2bil, up by 8% over the same period of the last year, committed ODA $4.4bil, and export turnover $22.4bil.
The report mentions challenges Vietnam’s economy is facing such as high inflation, low disbursement of ODA, export growth slowdown. In the report, investors can also find general analyses about the financial situations of enterprises, both listed and unlisted, which are classified by business fields.
Bao Viet Securities (BVSC) on August 8 released a report with the prediction that the VN Index will hover at the 1,000 point level at the year’s end. The report also gives reasons for the fall of the market in the second quarter of the year 1. the market did not have strong impetuses, the P/E index was high 2. the ‘room’ for foreign investors had run out in many local companies 3. the central bank issued the decision to limit loans for securities investments.
Moreover, the report also identifies another reason, which is that 90% of companies listing on HOSE issued more shares in order to raise funds to inject in real estate projects, while real estate is not their main business field.
BVSC gives an optimistic view about the business operations of several big companies and big business fields. “The VN Index is believed to be on the upturn, and possibly will return to around the 1,000 point level; by that time, the P/E will be 26-27,” the report reads.
Meanwhile, Thang Long Securities Company writes in its report that the market’s performance will be very satisfactory in the future, but will not boom.
CBV’s (Bien Viet Securities Company) report provides a review of the market in the first seven months of the year based on CBV set of indexes: CBV Index (based on the 50 listing companies which have the biggest transaction volumes and market values) reached 133.04 points in the time period, and the market capitalisation volume had reached VND315,272bil ($19,704mil) by the end of July. The profitability level of the companies in these fields, according to CBV’s method of calculation, is very satisfactory, and even though the market fell down in July, the companies still maintained profitability.
CBV advises investors to make investment in MidCap group (companies with medium scale) instead of LargeCap (big-size companies) or SmallCap. The suggested investment addresses are companies in the fields of oil and gas, consumer goods and health care.
Big companies have good positions in the market, good trademarks, but now they are absorbed in expanding their businesses into other fields, which is not necessarily to their advantage. “This is a bad thing, which may lead to the price decrease of big groups and corporations,” the report concludes.
History shows that big groups and corporations can dominate smaller ones only when they focus on their main business fields.
Analysts have said that securities firms were trying to release market reports in the last time in order to polish their names, thus attracting more clients. In general, the reports bring more advice to investors, helping them make timely and suitable decisions.
Source: VNE
Investors now have a lot of choices when they want reliable reports and market surveys to refer to before making investment decisions. Besides the reports released by foreign HSBC or Merrill Lynch, they can also seek information and advice in domestic-made reports by SSI, VDSC or BVSC.
SSI’s report hit the market first, called “Vietnam’s stock market: the story about development”. After that, a lot of other reports conducted by other securities firms appeared on the market with different styles and diversified analyses.
In its report, Rong Viet (Viet Dragon VDSC) provides figures showing the overall picture of the economy: GDP growth rate 7.87% in first half of 2007, FDI $5.2bil, up by 8% over the same period of the last year, committed ODA $4.4bil, and export turnover $22.4bil.
The report mentions challenges Vietnam’s economy is facing such as high inflation, low disbursement of ODA, export growth slowdown. In the report, investors can also find general analyses about the financial situations of enterprises, both listed and unlisted, which are classified by business fields.
Bao Viet Securities (BVSC) on August 8 released a report with the prediction that the VN Index will hover at the 1,000 point level at the year’s end. The report also gives reasons for the fall of the market in the second quarter of the year 1. the market did not have strong impetuses, the P/E index was high 2. the ‘room’ for foreign investors had run out in many local companies 3. the central bank issued the decision to limit loans for securities investments.
Moreover, the report also identifies another reason, which is that 90% of companies listing on HOSE issued more shares in order to raise funds to inject in real estate projects, while real estate is not their main business field.
BVSC gives an optimistic view about the business operations of several big companies and big business fields. “The VN Index is believed to be on the upturn, and possibly will return to around the 1,000 point level; by that time, the P/E will be 26-27,” the report reads.
Meanwhile, Thang Long Securities Company writes in its report that the market’s performance will be very satisfactory in the future, but will not boom.
CBV’s (Bien Viet Securities Company) report provides a review of the market in the first seven months of the year based on CBV set of indexes: CBV Index (based on the 50 listing companies which have the biggest transaction volumes and market values) reached 133.04 points in the time period, and the market capitalisation volume had reached VND315,272bil ($19,704mil) by the end of July. The profitability level of the companies in these fields, according to CBV’s method of calculation, is very satisfactory, and even though the market fell down in July, the companies still maintained profitability.
CBV advises investors to make investment in MidCap group (companies with medium scale) instead of LargeCap (big-size companies) or SmallCap. The suggested investment addresses are companies in the fields of oil and gas, consumer goods and health care.
Big companies have good positions in the market, good trademarks, but now they are absorbed in expanding their businesses into other fields, which is not necessarily to their advantage. “This is a bad thing, which may lead to the price decrease of big groups and corporations,” the report concludes.
History shows that big groups and corporations can dominate smaller ones only when they focus on their main business fields.
Analysts have said that securities firms were trying to release market reports in the last time in order to polish their names, thus attracting more clients. In general, the reports bring more advice to investors, helping them make timely and suitable decisions.
Source: VNE
Tuesday, August 14, 2007
Banks tighten securities investment funding
Banks have begun taking action to tighten the funding of securities investment deals in order to bring their outstanding loans to stock investors to below 3% of total outstanding loans as the central bank has required.
The Director of the Saigon Housing Development Bank at the end of June 2007 released a decision to stop funding securities investments immediately. The bank has also stopped the disbursement of the loans which had been approved by bank leaders. The director asked his staffs to re-assess the securities market value, and asked borrowers to reduce the outstanding loans or provide more mortgaged assets.
The Military Bank still opens its doors to securities investors, but the bank now only provides loans to clients who have accounts at securities companies with whom the bank has cooperation agreements.
Meanwhile, state-owned banks, which have outstanding loans for securities investments at low levels so far, below 2%, seem to not intend to expand credit to securities investors, though they still could do that.
Le Dao Nguyen, Deputy Director General of the Bank for Investment and Development of Vietnam (BIDV), said that BIDV did not intend to provide loans to fund securities trading deals.
According to AC Nielsen, a market research company, only 0.26% of Vietnam’s population participates in the stock market. By June 29, the number of accounts opened at securities companies had reached 200,000, including 5,000 ones owned by foreign institutions and investors. The figure proves to be very ‘modest’ if compared to the high population. It is estimated that 55 investment funds are present in Vietnam, which have brought a huge sum of money worth $6bil.
The State Bank of Vietnam on August 9 released a document urging banks to collect debts to lower the outstanding loans given for securities investments. Commercial banks have six months more to do that. This showed the central bank’s determination to put a cap on loaning for securities investments, despite protests from commercial banks.
Le Xuan Nghia, Director of the Banking Development Strategy Department under the State Bank of Vietnam, said that in the world only India limited its banks’ outstanding loans for securities investments at below 5%, while other countries allowed commercial banks to decide themselves how much to loan.
However, the central banks in these countries have good information systems, which allow them to initiate decisions in every bank quickly.
“The principle we follow is trying to limit loans for securities investments, but not cause big difficulties for banks and avoid sudden changes to the market,” Mr Nghia said.
Le Dac Son, Director General of VP Bank, said that in Vietnam, a fledgling market, it was necessary to control the loaning for securities investments. However, he said that it would be more appropriate to raise the cap from 3% of total outstanding loans to 5%-6%.
Source: VNS
The Director of the Saigon Housing Development Bank at the end of June 2007 released a decision to stop funding securities investments immediately. The bank has also stopped the disbursement of the loans which had been approved by bank leaders. The director asked his staffs to re-assess the securities market value, and asked borrowers to reduce the outstanding loans or provide more mortgaged assets.
The Military Bank still opens its doors to securities investors, but the bank now only provides loans to clients who have accounts at securities companies with whom the bank has cooperation agreements.
Meanwhile, state-owned banks, which have outstanding loans for securities investments at low levels so far, below 2%, seem to not intend to expand credit to securities investors, though they still could do that.
Le Dao Nguyen, Deputy Director General of the Bank for Investment and Development of Vietnam (BIDV), said that BIDV did not intend to provide loans to fund securities trading deals.
According to AC Nielsen, a market research company, only 0.26% of Vietnam’s population participates in the stock market. By June 29, the number of accounts opened at securities companies had reached 200,000, including 5,000 ones owned by foreign institutions and investors. The figure proves to be very ‘modest’ if compared to the high population. It is estimated that 55 investment funds are present in Vietnam, which have brought a huge sum of money worth $6bil.
The State Bank of Vietnam on August 9 released a document urging banks to collect debts to lower the outstanding loans given for securities investments. Commercial banks have six months more to do that. This showed the central bank’s determination to put a cap on loaning for securities investments, despite protests from commercial banks.
Le Xuan Nghia, Director of the Banking Development Strategy Department under the State Bank of Vietnam, said that in the world only India limited its banks’ outstanding loans for securities investments at below 5%, while other countries allowed commercial banks to decide themselves how much to loan.
However, the central banks in these countries have good information systems, which allow them to initiate decisions in every bank quickly.
“The principle we follow is trying to limit loans for securities investments, but not cause big difficulties for banks and avoid sudden changes to the market,” Mr Nghia said.
Le Dac Son, Director General of VP Bank, said that in Vietnam, a fledgling market, it was necessary to control the loaning for securities investments. However, he said that it would be more appropriate to raise the cap from 3% of total outstanding loans to 5%-6%.
Source: VNS
Low fines turn securities law into a toothless tiger
Authorities have recently punished a number of individuals and organisations for violating regulations in securities transactions, but analysts say the penalties haven't been strict enough.
Investors were eager when the State Securities Commission (SSC) first issued a decision to punish an investor in HCM City in late June with a fine of VND30mil (US$1,875) for entering into collusion to distort supply and demand on the market.
Less than a month later, two other individuals in the city were fined VND60mil ($3,750) and VND100mil ($6,250) for similar acts.
Among organisations, the Vietcombank, BIDV and Sai Gon Securities companies have were each fined VND10-20mil ($625-$1,250) for breaking securities management (i.e., registration, deposit, or payment) and reporting regulations.
Foreign companies were no exception. Indochina Capital was fined VND10mil for not conforming with regulations on internal transactions.
On July 25, the SSC slapped the Thien Viet Securities Co a VND50mil ($3,125) fine for its delay in publicising a change in its general director position.
On Monday, it announced a VND20mil ($1,250) fine on the Ba Ria-Vung Tau Housing Development Co for failure to make timely disclosures.
The SSC has taken great strides to make the market more transparent. However, the penalties it has issued so far have been too lightweight to have a real impact on investors, according to analysts, especially major players for whom a minor fine is mere chicken feed.
"The heaviest penalty for breaking securities laws or regulations is now only VND50mil. It's not a reasonable level," said SSC chief inspector Hoang Duc Long.
The commission is asking the Government to consider stricter penalty levels, he said, with some serious violations even subject to penal liability.
Authorities, meanwhile, face challenges in discovering all violations, Long said.
"In order to detect a lawbreaker, we have to check over 250,000 accounts on the market, and we only have about 20 inspectors," said Long.
"There have also been cases in which auditors have released inaccurate information or even colluded with enterprises to falsify reports. It's really a big concern."
Source: VNS
Investors were eager when the State Securities Commission (SSC) first issued a decision to punish an investor in HCM City in late June with a fine of VND30mil (US$1,875) for entering into collusion to distort supply and demand on the market.
Less than a month later, two other individuals in the city were fined VND60mil ($3,750) and VND100mil ($6,250) for similar acts.
Among organisations, the Vietcombank, BIDV and Sai Gon Securities companies have were each fined VND10-20mil ($625-$1,250) for breaking securities management (i.e., registration, deposit, or payment) and reporting regulations.
Foreign companies were no exception. Indochina Capital was fined VND10mil for not conforming with regulations on internal transactions.
On July 25, the SSC slapped the Thien Viet Securities Co a VND50mil ($3,125) fine for its delay in publicising a change in its general director position.
On Monday, it announced a VND20mil ($1,250) fine on the Ba Ria-Vung Tau Housing Development Co for failure to make timely disclosures.
The SSC has taken great strides to make the market more transparent. However, the penalties it has issued so far have been too lightweight to have a real impact on investors, according to analysts, especially major players for whom a minor fine is mere chicken feed.
"The heaviest penalty for breaking securities laws or regulations is now only VND50mil. It's not a reasonable level," said SSC chief inspector Hoang Duc Long.
The commission is asking the Government to consider stricter penalty levels, he said, with some serious violations even subject to penal liability.
Authorities, meanwhile, face challenges in discovering all violations, Long said.
"In order to detect a lawbreaker, we have to check over 250,000 accounts on the market, and we only have about 20 inspectors," said Long.
"There have also been cases in which auditors have released inaccurate information or even colluded with enterprises to falsify reports. It's really a big concern."
Source: VNS
Monday, August 13, 2007
VAFI considering setting up club of minority shareholders
The idea of setting up a club of minority shareholders, which has been suggested by Head of the Division for Macroeconomic Studies Research under the Central Institute of Economic Management (CIEM) Nguyen Dinh Cung, is being considered by the Vietnam Association of Financial Investors (VAFI).
Mr Cung said that in Vietnam there existed legal loopholes which could cause small shareholders, called ‘minority shareholders’, losses. He said that while waiting for the legal framework to be perfected, minority shareholders should stand in an organisation, a club for minority shareholders, so as to be able to protect themselves better.
Regarding the legal loopholes, Mr Cung said that the Enterprise Law and Securities Law both mentioned provisions for the protection of minority shareholders. However, the provisions are still far from reaching the highest standards in international practice.
For example, current laws require listing companies to expose regular information, irregular information as stipulated in Circular No 38 issued by the Ministry of Finance. However, information relating to the assessment about the future of listing companies is not required by the laws, while the information is very important.
For example, investors should know the assessment by listing companies’ management boards on the changes of the markets, the impacts of the capital market, and so on. They also deserve to know how many percent of stakes the management board holds in one company or another and the ability of the members of the management board.
Mr Cung said that only when investors were provided with the information they needed, especially information about possible changes with the listing companies, could they make suitable investment decisions ensuring healthy and transparent transactions.
He said that minority shareholders should gather to propose amendments to the legal documents that could help protect their benefit. For example, the current laws do not prohibit members of management boards from transferring shares. And in order to limit transfers, minority shareholders should ask for the stipulation that a transfer would only be allowed if the deal was accepted by the management board to ensure that it did not cause a supply-demand imbalance and losses for them.
For the time being, minority shareholders should gather in one club, in which they can exchange information and protect each others’ benefits.
Mr Cung has admitted that it is difficult to gather shareholders in one club. In fact, several groups of investors have been thinking of such clubs, but these are just small-scale clubs. “Such a club should be organised on a bigger scale, and there should be supporters, and a pioneer who leads the club,” he said.
Source: VNE
Mr Cung said that in Vietnam there existed legal loopholes which could cause small shareholders, called ‘minority shareholders’, losses. He said that while waiting for the legal framework to be perfected, minority shareholders should stand in an organisation, a club for minority shareholders, so as to be able to protect themselves better.
Regarding the legal loopholes, Mr Cung said that the Enterprise Law and Securities Law both mentioned provisions for the protection of minority shareholders. However, the provisions are still far from reaching the highest standards in international practice.
For example, current laws require listing companies to expose regular information, irregular information as stipulated in Circular No 38 issued by the Ministry of Finance. However, information relating to the assessment about the future of listing companies is not required by the laws, while the information is very important.
For example, investors should know the assessment by listing companies’ management boards on the changes of the markets, the impacts of the capital market, and so on. They also deserve to know how many percent of stakes the management board holds in one company or another and the ability of the members of the management board.
Mr Cung said that only when investors were provided with the information they needed, especially information about possible changes with the listing companies, could they make suitable investment decisions ensuring healthy and transparent transactions.
He said that minority shareholders should gather to propose amendments to the legal documents that could help protect their benefit. For example, the current laws do not prohibit members of management boards from transferring shares. And in order to limit transfers, minority shareholders should ask for the stipulation that a transfer would only be allowed if the deal was accepted by the management board to ensure that it did not cause a supply-demand imbalance and losses for them.
For the time being, minority shareholders should gather in one club, in which they can exchange information and protect each others’ benefits.
Mr Cung has admitted that it is difficult to gather shareholders in one club. In fact, several groups of investors have been thinking of such clubs, but these are just small-scale clubs. “Such a club should be organised on a bigger scale, and there should be supporters, and a pioneer who leads the club,” he said.
Source: VNE
OTC market to be monitored
Delegates who attended a seminar recently organised by the State Securities Commission (SSC) in Hanoi all shared the view that it’s time the over-the-counter market in Vietnam should be monitored.
According to SSC’s draft plan, unlisted public companies will have to register and deposit their shares at the Securities Depository Centre through a securities company which is a depository member.
Investors who want to carry out transactions of OTC shares have to open accounts at a securities company. Transactions will still be carried out through negotiations but all selling and buying orders will have to be carried out through their accounts at securities companies. These orders will then be transferred to a new system for regulating OTC transactions at the Hanoi Securities Trading Centre, allowing brokers to gain access, find buyers and sellers and make deals for investors.
HaSTC will collect results of transactions and then transferred to the depository centre within the same day for accounts’ balance.
Regulations on transactions on the OTC market will not be as tight as those on listed shares. There are no regulations on reference price, price fluctuation margin and trading unit. Investors can buy and sell one kind of stock within one trading day and payment settlement date will be T + 3, like the settlement applied to current transactions of listed stocks.
Experts hope that trading OTC shares through brokerages will help reduce risks for investors.
The SSC plans to select some public companies working in the financial, banking, insurance and securities sectors to make a trial run of the new OTC procedures in November before operating officially in early 2008.
Representatives of securities companies including Bao Viet, Thang Long and SSI all welcomed the SSC’s plan. However, they voiced their concerns over the possibility that securities companies will be swindled of their commissions for OTC trades by investors if there are no regulations referencing prices and price fluctuation margins.
“If there is no price fluctuation margin, investors may collude with each other to set up lower prices in order to cheat on commission fees.
Some have proposed a price fluctuation margin of 20% while some others insist that there should be reference prices. This will help prevent artificial inflated transactions, protecting small, individual investors and ensure a basis calculating fees and commissions for securities companies.
A Bao Viet Securities representative also proposed a common par value of VND 10,000 for shares of public companies as of now the par value of shares of public companies varies from VND 10,000, VND 100,000, VND 1 million.
All delegates urged the SSC to pour proper investment into a modern infrastructural facilities and information technology for the monitoring of this OTC market so as to ensure that it operates smoothly, meeting the market’s development for at least five years.
They also asked SSC to encourage public companies to fulfill their responsibilities in information announcements to investors, ensuring fairness, publicity and transparency in securities market activities.
The monitoring of transactions of shares of unlisted public companies can be considered as one of the measures to strengthen the supervision of the securities market so as to help ensure a health and sustainable development of Vietnamese stock market.
Source: VNE
According to SSC’s draft plan, unlisted public companies will have to register and deposit their shares at the Securities Depository Centre through a securities company which is a depository member.
Investors who want to carry out transactions of OTC shares have to open accounts at a securities company. Transactions will still be carried out through negotiations but all selling and buying orders will have to be carried out through their accounts at securities companies. These orders will then be transferred to a new system for regulating OTC transactions at the Hanoi Securities Trading Centre, allowing brokers to gain access, find buyers and sellers and make deals for investors.
HaSTC will collect results of transactions and then transferred to the depository centre within the same day for accounts’ balance.
Regulations on transactions on the OTC market will not be as tight as those on listed shares. There are no regulations on reference price, price fluctuation margin and trading unit. Investors can buy and sell one kind of stock within one trading day and payment settlement date will be T + 3, like the settlement applied to current transactions of listed stocks.
Experts hope that trading OTC shares through brokerages will help reduce risks for investors.
The SSC plans to select some public companies working in the financial, banking, insurance and securities sectors to make a trial run of the new OTC procedures in November before operating officially in early 2008.
Representatives of securities companies including Bao Viet, Thang Long and SSI all welcomed the SSC’s plan. However, they voiced their concerns over the possibility that securities companies will be swindled of their commissions for OTC trades by investors if there are no regulations referencing prices and price fluctuation margins.
“If there is no price fluctuation margin, investors may collude with each other to set up lower prices in order to cheat on commission fees.
Some have proposed a price fluctuation margin of 20% while some others insist that there should be reference prices. This will help prevent artificial inflated transactions, protecting small, individual investors and ensure a basis calculating fees and commissions for securities companies.
A Bao Viet Securities representative also proposed a common par value of VND 10,000 for shares of public companies as of now the par value of shares of public companies varies from VND 10,000, VND 100,000, VND 1 million.
All delegates urged the SSC to pour proper investment into a modern infrastructural facilities and information technology for the monitoring of this OTC market so as to ensure that it operates smoothly, meeting the market’s development for at least five years.
They also asked SSC to encourage public companies to fulfill their responsibilities in information announcements to investors, ensuring fairness, publicity and transparency in securities market activities.
The monitoring of transactions of shares of unlisted public companies can be considered as one of the measures to strengthen the supervision of the securities market so as to help ensure a health and sustainable development of Vietnamese stock market.
Source: VNE
Friday, August 10, 2007
OTC market in disorder
“Chaotic” is the word analysts use to describe the OTC market at this moment: few transactions are successful, while there is no trustworthy price reference.
Analysts have said that the OTC market is in the gloomiest period in its history. There are no benchmarks for stock prices. Investors are facing risks in liquidity. They are looking forward to the day when OTC transactions are put under the supervision of the State Securities Commission (SSC).
There exist big gaps in the referred prices of stocks shown on securities websites. A website said that EIB’s (Eximbank) price was now 7.05 times higher than the face value, while another said 6.9. Meanwhile, on a website specialising in OTC transactions, an investor offers EIB at 6.7 but still cannot find buyers.
PNB is offering Vietstock at 3.75, while on another website, an investor remains unsuccessful with his sale of PNB at 3.6.
Le Hiep, an investor on HSC trading floor, who also makes OTC transactions, said that he himself found it difficult to buy or sell now on the OTC market. “When the market was hot, investors always made deals very quickly, but now they find it hard to reach agreements on final prices,” Mr Hiep said.
He added that it sometimes takes several days to make a deal. Meanwhile, on the official bourse, the orders of investors can be implemented in just several tens of seconds or within a trading session at maximum, because investors can make quick decisions after considering the reference prices and the trading band.
Mr Hiep said that on the official bourse, when a listing company issued additional shares, the price of the company’s shares would be adjusted immediately in accordance with a set formula. Meanwhile, no one takes this work of calculating and adjusting the reference price on the OTC market. The data on OTC websites sometimes is not updated even when companies issue additional shares; therefore, investors do not know what prices would be suitable.
“The OTC market needs a conductor,” said Nguyen Dung, an investor, who has an account at ACBS.
As there is no benchmark for stock prices, many institutions have been trying to set prices for the market. They, under the cloak of investors, offer to buy shares at different price levels in order to explore the situation. The existence of such institutions has been making the market more chaotic.
In general, investors make transactions with the assistance of ‘brokers’. Investors inform the brokers the prices they want, and brokers will find the investors suitable for the deals.
Analysts say that OTC transactions are in a vicious circle. Investors, afraid of the risks in price and liquidity, are trying not to make transactions these days, making less and less transactions successful. Meanwhile, as there are few transactions, the risks investors have to face have become more serious.
Investors on the OTC market all expect SSC to set up a transaction management system, which will help make the market become healthier.
Tran Thanh Nam, a staff from the MHB Securities Company’s Brokerage Company, said that once the system became operational, transactions on the OTC market would be more bustling and orderly.
Source: VNE
Analysts have said that the OTC market is in the gloomiest period in its history. There are no benchmarks for stock prices. Investors are facing risks in liquidity. They are looking forward to the day when OTC transactions are put under the supervision of the State Securities Commission (SSC).
There exist big gaps in the referred prices of stocks shown on securities websites. A website said that EIB’s (Eximbank) price was now 7.05 times higher than the face value, while another said 6.9. Meanwhile, on a website specialising in OTC transactions, an investor offers EIB at 6.7 but still cannot find buyers.
PNB is offering Vietstock at 3.75, while on another website, an investor remains unsuccessful with his sale of PNB at 3.6.
Le Hiep, an investor on HSC trading floor, who also makes OTC transactions, said that he himself found it difficult to buy or sell now on the OTC market. “When the market was hot, investors always made deals very quickly, but now they find it hard to reach agreements on final prices,” Mr Hiep said.
He added that it sometimes takes several days to make a deal. Meanwhile, on the official bourse, the orders of investors can be implemented in just several tens of seconds or within a trading session at maximum, because investors can make quick decisions after considering the reference prices and the trading band.
Mr Hiep said that on the official bourse, when a listing company issued additional shares, the price of the company’s shares would be adjusted immediately in accordance with a set formula. Meanwhile, no one takes this work of calculating and adjusting the reference price on the OTC market. The data on OTC websites sometimes is not updated even when companies issue additional shares; therefore, investors do not know what prices would be suitable.
“The OTC market needs a conductor,” said Nguyen Dung, an investor, who has an account at ACBS.
As there is no benchmark for stock prices, many institutions have been trying to set prices for the market. They, under the cloak of investors, offer to buy shares at different price levels in order to explore the situation. The existence of such institutions has been making the market more chaotic.
In general, investors make transactions with the assistance of ‘brokers’. Investors inform the brokers the prices they want, and brokers will find the investors suitable for the deals.
Analysts say that OTC transactions are in a vicious circle. Investors, afraid of the risks in price and liquidity, are trying not to make transactions these days, making less and less transactions successful. Meanwhile, as there are few transactions, the risks investors have to face have become more serious.
Investors on the OTC market all expect SSC to set up a transaction management system, which will help make the market become healthier.
Tran Thanh Nam, a staff from the MHB Securities Company’s Brokerage Company, said that once the system became operational, transactions on the OTC market would be more bustling and orderly.
Source: VNE
Wednesday, August 08, 2007
Paradox exists on corporate bond market
In developed economies, when the share market falls, investors tend to turn their investments to the bond market, which is less risky. However, it is quite different in Vietnam: when the VN Index falls, the bond market also becomes quiet.
At the Hanoi Securities Trading Centre, the daily value of bond transactions accounts for 70% of the total value of transactions on the market, worth VND170-180bil ($10.62mil).
However, Vietnam’s bond market is still considered underdeveloped for many reasons.
First, the scale of the market remains small, equivalent to 3-6% of GDP. In a developed stock market like the US’, the value of the bond market is equivalent to 80% of the country’s GDP.
Second, the main commodity of the market is the government bond, accounting for 80% of total issued bonds. Meanwhile, the corporate bond, not the government bond, plays the decisive role in creating the attractiveness of the market.
According to a recent report by the Hong Kong and Shanghai Banking Corporation (HSBC), the issued corporate bonds had the value of more than VND4tril ($250mil). The biggest bond issuers are the Bank for Investment and Development of Vietnam (BIDV), Electricity of Vietnam (EVN), the Vietnam Shipbuilding Industry Corporation (Vinashin). Most recently, the HCM City Infrastructure Investment and Development Company (CII) has successfully issued VND500bil worth of corporate bonds. Meanwhile, Vinashin has been well known for its successful bond issuance, raising VND3tril ($187.5mil) in capital.
The bonds’ interest rates proved to be attractive to investors. EVN’s 10-year interest rate was 8.9%, while BIDV’s 15-year interest rate was 8.4%, higher than the government bond’s rate, at nearly 8%.
According to HSBC, an estimated VND12tril ($750mil) worth of corporate bonds will be issued from now to the end of the year, raising the total value of bonds to be issued this year to VND16tril ($1bil), higher than the volume of VND15tril ($937.5mil) in 2006.
Enterprises well understand that issuing bonds is a good way to raise funds. This is a source of long-term capital with stable interest rates. The bond issuers only have to pay interest to bond holders every year, 8-10% on average. The interest rate proves to be much lower than that which the dividend companies have to pay their shareholders, thus helping make the costs of raising capital lower.
However, in fact, not many enterprises want to issue bonds. The government still has to come forward and issue bonds, then re-lend raised capital to enterprises. The process proves to waste time and money.
The biggest problem lies in bond issuance techniques. Many Vietnamese enterprises cannot meet the standardised requirements in accountancy (having financial reports audited and having no credit rating).
Source: VNE
At the Hanoi Securities Trading Centre, the daily value of bond transactions accounts for 70% of the total value of transactions on the market, worth VND170-180bil ($10.62mil).
However, Vietnam’s bond market is still considered underdeveloped for many reasons.
First, the scale of the market remains small, equivalent to 3-6% of GDP. In a developed stock market like the US’, the value of the bond market is equivalent to 80% of the country’s GDP.
Second, the main commodity of the market is the government bond, accounting for 80% of total issued bonds. Meanwhile, the corporate bond, not the government bond, plays the decisive role in creating the attractiveness of the market.
According to a recent report by the Hong Kong and Shanghai Banking Corporation (HSBC), the issued corporate bonds had the value of more than VND4tril ($250mil). The biggest bond issuers are the Bank for Investment and Development of Vietnam (BIDV), Electricity of Vietnam (EVN), the Vietnam Shipbuilding Industry Corporation (Vinashin). Most recently, the HCM City Infrastructure Investment and Development Company (CII) has successfully issued VND500bil worth of corporate bonds. Meanwhile, Vinashin has been well known for its successful bond issuance, raising VND3tril ($187.5mil) in capital.
The bonds’ interest rates proved to be attractive to investors. EVN’s 10-year interest rate was 8.9%, while BIDV’s 15-year interest rate was 8.4%, higher than the government bond’s rate, at nearly 8%.
According to HSBC, an estimated VND12tril ($750mil) worth of corporate bonds will be issued from now to the end of the year, raising the total value of bonds to be issued this year to VND16tril ($1bil), higher than the volume of VND15tril ($937.5mil) in 2006.
Enterprises well understand that issuing bonds is a good way to raise funds. This is a source of long-term capital with stable interest rates. The bond issuers only have to pay interest to bond holders every year, 8-10% on average. The interest rate proves to be much lower than that which the dividend companies have to pay their shareholders, thus helping make the costs of raising capital lower.
However, in fact, not many enterprises want to issue bonds. The government still has to come forward and issue bonds, then re-lend raised capital to enterprises. The process proves to waste time and money.
The biggest problem lies in bond issuance techniques. Many Vietnamese enterprises cannot meet the standardised requirements in accountancy (having financial reports audited and having no credit rating).
Source: VNE
Foreigners snap up shares as market eases off
A few financial institutions are not optimistic about the Vietnamese stock market’s near-term future, but that hasn’t deterred droves of foreigners from opening trading accounts with a stockbroker. Right now, when the market is trending gently down, foreign retail and institutional investors have been busy buying up shares at what they consider bargain prices.
These days in Ho Chi Minh City there are lots of foreigners, some of them tourists, mingling with the locals at the offices of Saigon Securities, HCMC Securities, ACB Securities Co. and other stockbrokers.
Usually the tourists are there as part of an organized tour party, something that the travel companies only began doing recently.
Mr. Hieu is a regular tour guide who likes to take visitors to one or more of the city’s stockbrokers. “They want to familiarize themselves with the atmosphere of Vietnamese trading floors. Before coming to Viet Nam, they study our stock market thoroughly,” Hieu said.
“Some visitors even schedule a time to buy and sell shares, and some return to Viet Nam alone or with friends for a longer stay so that they can open a trading account and do lots of buying and selling,” he added.
“It would be hard to recognize them as tourists were it not for the presence of a tour guide accompanying them,” the broker said. “The way they study the market and trades, all the questions they ask, show that they really know their stuff.”
Vietnamese stockbrokers reckon that investors from countries with long-established stock markets can make more than enough money to pay for their trip if they just spend a short time speculating with Vietnamese shares, sort of straight in and straight out again.
Foreigners who interrupt their travels for a few quick trades are just one of the three groups that get involved in the Vietnamese stock market, the others being institutions and individuals who buy and hold with a view to making capital gains over time.
According to the State Securities Commission, there were 243,809 stock-trading accounts as of June 30, of which 5,568 holding shares, bonds and cash of US$5 billion were held by foreigners.
Retail investors accounted for nearly the entire lot - 5,353 to be precise - and Japanese people held 70 percent of these individual accounts.
If you visit a stockbroker on Ho Chi Minh City’s “Wall Street” (Nguyen Cong Tru) in District 1, places like Dong A (East Asia), Dai Viet, Phuong Dong, or Sai Gon Securities, on any weekday morning you’ll see large numbers of Japanese people talking shares, contemplating and quietly jotting down tidbits of information.
Akzumi from Japan is one such investor. “I learned about the Vietnamese stock market through Tokyo TV and other media in Japan. I flew here to study the market and decided to invest in Vietnamese shares for the long-term, at least five years," he said.
“I don’t care about the daily ups and downs of share prices or what the VN-Index is doing at any one point in time. What matters to me is the potential of Vietnamese companies.”
Why do foreigners choose Viet Nam even though some major institutions are not optimistic about the local stock market in the near or medium term?
Economist Le Hong Thanh, who teaches about shares and securities in general, gives four reasons why the Vietnamese stock market attracts foreign investors.
“Firstly, it’s a new market and many stocks with potential will be available, like banks and property developers. Secondly, Viet Nam joined the World Trade Organization, which demonstrates that the country is politically and economically stable. Thirdly, the country’s gross domestic product reached eight percent in the first half of the year, a rather impressive figure compared to other ASEAN countries. Fourthly, major foreign companies have invested in Viet Nam, making the market more exciting.”
For quite some time Vietnamese investors have watched foreign investors and noted what shares they buy and sell, then duly followed the foreign lead rather than rely on their own judgment.
Mr. Vinh is a local investor who was observing the action at Dai Viet Securities. “Foreign share traders are very experienced, so it’s better to follow them rather than trying to do the research on your own,” he said.
Another fan of shares, Mr. Quan, likes to do his own analysis and rely on his experience. “When I’m trying to decide what to buy, I rarely heed what foreign investors are doing. Still, when local investors follow them and rush to buy the same stocks, I too feel agitated,” Quan confessed.
Economist Thanh thinks it is essential to learn from foreign investors and what they practice but warns his compatriots to tread carefully.
“If local investors refuse to think for themselves, they can fall into a trap. Foreign investors have loads of money to play with and can move the market easily, and in a direction that can cost the naïve locals dearly,” he said.
“Therefore, when Vietnamese people decide to invest in shares long-term, they must take the initiative and analyze everything, become masters of price change, and make the most of the available information,” Thanh added.
Analysts say that having many foreign elements investing in the country’s stock market makes it more exciting, diversified and global in nature – like any true any stock market needs to be.
However, the biggest worry is that, in addition to the foreign investment funds, institutions and retail investors who seem to have long-term intentions and strategies, there are an increasing number of foreign speculators whose actions could destabilize and even wreak havoc on Viet Nam’s young stock market.
Source: VNE
These days in Ho Chi Minh City there are lots of foreigners, some of them tourists, mingling with the locals at the offices of Saigon Securities, HCMC Securities, ACB Securities Co. and other stockbrokers.
Usually the tourists are there as part of an organized tour party, something that the travel companies only began doing recently.
Mr. Hieu is a regular tour guide who likes to take visitors to one or more of the city’s stockbrokers. “They want to familiarize themselves with the atmosphere of Vietnamese trading floors. Before coming to Viet Nam, they study our stock market thoroughly,” Hieu said.
“Some visitors even schedule a time to buy and sell shares, and some return to Viet Nam alone or with friends for a longer stay so that they can open a trading account and do lots of buying and selling,” he added.
“It would be hard to recognize them as tourists were it not for the presence of a tour guide accompanying them,” the broker said. “The way they study the market and trades, all the questions they ask, show that they really know their stuff.”
Vietnamese stockbrokers reckon that investors from countries with long-established stock markets can make more than enough money to pay for their trip if they just spend a short time speculating with Vietnamese shares, sort of straight in and straight out again.
Foreigners who interrupt their travels for a few quick trades are just one of the three groups that get involved in the Vietnamese stock market, the others being institutions and individuals who buy and hold with a view to making capital gains over time.
According to the State Securities Commission, there were 243,809 stock-trading accounts as of June 30, of which 5,568 holding shares, bonds and cash of US$5 billion were held by foreigners.
Retail investors accounted for nearly the entire lot - 5,353 to be precise - and Japanese people held 70 percent of these individual accounts.
If you visit a stockbroker on Ho Chi Minh City’s “Wall Street” (Nguyen Cong Tru) in District 1, places like Dong A (East Asia), Dai Viet, Phuong Dong, or Sai Gon Securities, on any weekday morning you’ll see large numbers of Japanese people talking shares, contemplating and quietly jotting down tidbits of information.
Akzumi from Japan is one such investor. “I learned about the Vietnamese stock market through Tokyo TV and other media in Japan. I flew here to study the market and decided to invest in Vietnamese shares for the long-term, at least five years," he said.
“I don’t care about the daily ups and downs of share prices or what the VN-Index is doing at any one point in time. What matters to me is the potential of Vietnamese companies.”
Why do foreigners choose Viet Nam even though some major institutions are not optimistic about the local stock market in the near or medium term?
Economist Le Hong Thanh, who teaches about shares and securities in general, gives four reasons why the Vietnamese stock market attracts foreign investors.
“Firstly, it’s a new market and many stocks with potential will be available, like banks and property developers. Secondly, Viet Nam joined the World Trade Organization, which demonstrates that the country is politically and economically stable. Thirdly, the country’s gross domestic product reached eight percent in the first half of the year, a rather impressive figure compared to other ASEAN countries. Fourthly, major foreign companies have invested in Viet Nam, making the market more exciting.”
For quite some time Vietnamese investors have watched foreign investors and noted what shares they buy and sell, then duly followed the foreign lead rather than rely on their own judgment.
Mr. Vinh is a local investor who was observing the action at Dai Viet Securities. “Foreign share traders are very experienced, so it’s better to follow them rather than trying to do the research on your own,” he said.
Another fan of shares, Mr. Quan, likes to do his own analysis and rely on his experience. “When I’m trying to decide what to buy, I rarely heed what foreign investors are doing. Still, when local investors follow them and rush to buy the same stocks, I too feel agitated,” Quan confessed.
Economist Thanh thinks it is essential to learn from foreign investors and what they practice but warns his compatriots to tread carefully.
“If local investors refuse to think for themselves, they can fall into a trap. Foreign investors have loads of money to play with and can move the market easily, and in a direction that can cost the naïve locals dearly,” he said.
“Therefore, when Vietnamese people decide to invest in shares long-term, they must take the initiative and analyze everything, become masters of price change, and make the most of the available information,” Thanh added.
Analysts say that having many foreign elements investing in the country’s stock market makes it more exciting, diversified and global in nature – like any true any stock market needs to be.
However, the biggest worry is that, in addition to the foreign investment funds, institutions and retail investors who seem to have long-term intentions and strategies, there are an increasing number of foreign speculators whose actions could destabilize and even wreak havoc on Viet Nam’s young stock market.
Source: VNE
Tuesday, August 07, 2007
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
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
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