Putting OTC market under management – when?

State management authorities are trying to speed up the compilation of legal documents, based on which, the OTC market will be put under management, expected for early 2008.

State Securities Commission (SSC) plans to put the OTC market under management in early 2008. However, experts fear that the short time left (four months) until early next year will not be enough time as a lot of things still need to be done.

It is necessary to build up a software system for the Hanoi Securities Trading Centre (HASTC) and software for the Securities Depository Centre in charge of managing the transaction registrations by public companies. Moreover, it will also be necessary to install software at securities companies and the system connecting securities companies and HASTC, serving the transfer of information about securities transactions and offset payment among securities companies, the depository centre and HASTC.

In the immediate time, several big companies out of the registered public companies will be selected to be put under the pilot transaction scheme. These might be big companies operating in the fields of banking, insurance and other financial institutions which have good governance systems.

The application of the transaction scheme for other public companies will be applied on a large scale in June 2008 or at the end of 2008, according to Nguyen Son, Deputy Head of the Market Development Division under SSC.

Mr Son said that SSC was considering applying the reference price scheme and trading band for the shares of unlisted public companies. The most feasible scheme and the plan which has been most suggested is the application of the trading band of +/- 20% (the ceiling transaction price must not be 20% higher than the reference price and the minimum price must not be 20% lower than the reference price).

However, problems still exist. Experts still argue about whether or not to draw up the reference price of the first trading session. Moreover, it remains unclear which basis state management authorities will use to draw up the list of fees public companies have to pay to the securities trading centre, securities depository centre and brokerage commission.

According to Mr Son, there are two factors that can decide if the project on putting the OTC market under management can be successful: technology and awareness of enterprises.

According to Mr Son, once the OTC market is put under control, the market regulator will have to manage a big number of companies, much bigger than the number of listing companies now. Will the technologies and facilities at trading centres and securities companies be able to cover such a big number of securities companies?

Mr Son has acknowledged that technology remains the biggest problem and that it needs to be fixed in 3-6 months.

“The core issue is the capacity of transaction systems. The number of public companies may reach several thousand if all the companies register. These include the ones which have very big market capitalisation volume.

“If we don’t make heavy investment in technologies, the project on putting the OTC under management will fail,” Mr Son 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

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

OTC transactions to be put under control in early 2008

OTC share transactions will be put under control once the project on organizing and managing the transactions of public companies’ unlisted securities is completed.

The State Securities Commission (SSC) said that it has consulted with relevant ministries over the project and will open the draft for collecting opinions from securities investors in early August before bringing the project into effect.

If everything goes smoothly, transactions of OTC securities under the new scheme will be carried out in the trial basis in October, and officially applied in early 2008.

According to SSC, the securities to be put under the new scheme are the shares of public companies which have registered at state management agencies as stipulated by the current laws. These shares items will be granted codes. Investors will carry out transactions through securities companies based on their accounts to be opened at securities companies.

Under the new transaction scheme, investors will have more opportunities to access official information sources, make payment under favourable methods and minimize risks.

Currently, the preparatory works for the new transaction scheme have been kicked off at the Hanoi Securities Trading Centre. The main principle of the new scheme is to ensure the simplicity in making transaction, while allowing remote transactions which aims to create more favourable conditions for investors.

According to SSC, more than 600 companies have sent files for registering public companies. However, the number of companies completing the registration procedures remains modest.

The problem lies in the fact that the documents guiding the registration were just promulgated in April, which did not give enough time to companies to have their financial reports audited. SSC has to apply a flexible policy, which allows companies to make registration first, and then expose information to investors. The auditing results will be announced later.

June 30, 2007 was the deadline for public companies to make registration at SSC.

Source: VNE

Bank shares swim against the tide

TrBank shares are showing signs of recovery on the back of heavy trading on both the stock exchange and the unofficial over-the-counter (OTC) market, though analysts remain sceptical how long the trend will last.

On the OTC market, bank shares slipped 40-50 per cent in late June, but rebounded 10-15 per cent in recent sessions.

The mild rebound comes at a good time for many investors, considering the State Bank of Viet Nam has just set a deadline for financial institutions to limit loans on securities investments to 3 per cent of total outstanding debt by the end of December. Investors do not have the cash resources they once had at the start of the year.

"After the State Bank directive aimed at curbing risky lending practises, we do not have a lot of money to buy high-value shares, so the cheaper bank stocks are a suitable choice," said a retail investor at An Binh JSB, commonly known as ABBank, in a recent interview.
Investors hope banks will continue to gain momentum in the weeks ahead, or at least help them ride out this period of inactivity in the market.

"In this dull market, the positive financial results from the joint stock banks have really given us hope. Look at Asia Commercial Bank [ACB]; it earned a pre-tax profit of VND880 billion (US$55 million) in the first half of the year against VND700 billion ($43.75 million) in the whole of last year," said Le Mai Phuong, a retail investor at ACB Securities.

Though, analysts remain concerned how much higher share prices can go. A senior executive at Kim Long Securities said current prices closely reflect the real value of the banks and that prior to the 40 per cent drop in June shares were grossly overvalued.

Bank shares, though, provide a certain safety net for investors in short term trading - their liquidity tends to be much higher than in most other sectors. Liquidity plays an important factor for investors who need to adjust their portfolios quickly in case of more monetary tightening by the State Bank or to purchase shares in initial public offerings.

"It is quite reasonable that investors prefer bank shares over others. Banks have higher liquidity and bigger daily trading volumes," said the Kim Long analyst.

Another factor in recent weeks has been mid-year earnings, which have not played a major role in spurring trading activity but have acted as a barometer for the sector in the mid to long run - assets and loans continue their healthy growth while most large financial institutions recorded profits.

"The recent rise and fall of share prices are not due so much to performance as lending and revenue have strongly increased.
Moreover, some banks have reported extra-ordinary investment gains. These results reflect the good health of the banking system," said Dominic Scriven, director of Dragon Capital.

Extra ordinary gains include stock offerings; when Sacombank sold shares to ANZ Bank, for example, the local financial institute received US$27 million in the deal, which not only helped its bottom line but also spurred trading activity. In the long run, the deal will help Sacombank improve services with its new, well-established partner advising on management training and technology upgrades.

There are a number of factors, though, that will likely keep bank stocks in check over the coming months. In recent weeks, prices have been cut following the release of HSBC and Merrill Lynch reports indicating there is little upside to the market at current price levels with a lack of new information to stimulate trading.

"It’s hard to say if shares prices will currently increase or remain unchanged. I think, after the latest Merrill Lynch report, investors will quickly dump shares and ignore losses, which might put pressure on stock prices for now," said ACB spokesman Nguyen Thanh Toai.

Another factor that will weigh on bank stocks is the list of 21 initial public offerings the Government intends to hold as it equitises State-owned enterprises during the second half of the year. The equitisation includes the country’s four largest banks.

"I am not too interested in bank shares right now as the market is so dull. I am instead waiting for the high quality shares of leading State-owned commercial banks over the next few months," said a retail investor at Bao Viet Securities. "Individual investors like me do not have much money to invest, so we must save up for the IPOs now."

The four State banks - Vietcombank, Incombank, Mekong Housing Bank and BIDV - will add another VND18–20 trillion ($1.12-1.25 billion) worth of shares to the market, according to Bank for Investment and Development of Viet Nam (BIDV) General Director Tran Bac Ha.

Central bank officials have also indicated the joint stock banks have submitted forms to increase their charter capital by the end of the year, pursuant to Government regulations. A popular way for companies over to do this is to dilute stock values by auctioning more shares.

The flood of new stocks could keep already listed banks or those trading on the OTC market under a degree of price pressure over the next five months, say analysts.

"Though the appearance of shares in [the country’s four] leading banks may encourage another market correction, the correction will help the market develop steadily in the long run," said Ha.

Source: VNS

VN Index likely to remain flat in the months ahead

The VN Index went through a phase of growth and then consolidation in the first half of the year, but will likely level out in the months ahead if conditions remain unchanged.
In the first phase, which began during the closing months of 2006, the VN-Index crossed the 1,000 point threshold to peak at 1,170 on March 12, 2007 with overall market value topping VND1.64 trillion (US$102.5 million).

Then in the second phase a correction took hold, during which the VN-Index fell below the crucial 1,000-point psychological barrier on April 22. The exchange rebounded in May, but performance remained weak. Now the index fluctuates around the 1,000 level, which is still 38 per cent higher than where it was six months ago.

Despite the impressive growth on the Vietnamese stock market - total market capitalisation is currently about 31 per cent of GDP (VND304 trillion or $20 billion), surpassing the State Securities Commission’s (SSC’s) 2010 target - and the strong 7.9 per cent economic growth rate in the first half of 2007, we do not see any evidence the exchange will again aggressively climb higher for the following reasons:

First, supply will likely exceed demand. During the first six months, the 40 companies that listed added almost 451 million shares to the market, while a stream of larger companies plan to host IPOs from now until the end of the year, including the country’s four largest banks.
News has also recently hit the market of other State-owned giants in telecommunications and brewing planning to go public in the coming months.

As a result, there are questions whether the market will be able to absorb this huge influx of shares, especially given demand currently seems to be limited.

Limited demand can be attributed to several factors, including Directive 03/2007 issued by the State Bank of VN (SBV) that caps a bank’s loans on securities trading to 3 per cent of their total outstanding debt. Although the SBV has extended the deadline for credit institutions to meet the 3 per cent cap until December 31, 2007, the directive limits investors’ ability to borrow money to fund securities purchases.

Demand levels have also fallen due to the huge sum of capital frozen in the over-the-counter (OTC) market where buyers are scarce. Investors are unable to liquidate their OTC holdings and seek opportunities on the official stock market.


Second, capital disbursement of foreign investment funds has slowed.

The stock market has become increasingly attractive to foreign players with companies such as VinaCapital and Dragon Capital creating additional foreign funds. In addition many fund managers are awaiting licenses to enter the Vietnamese market.

Unfortunately, there is still no time frame for when this foreign capital will be injected into the market, especially now there is little to no investment room in blue chips and other strong-performing stocks.

In addition, most foreign funds do not want to invest in the OTC market.

A foreign fund manager recently said he was unsure when his company would spend the $200 million it has in reserve because there was nowhere to spend the cash - a case of too much money chasing too few good deals. However, the fund still plans to buy into real estate and tourism projects.

In fact, many large funds - including VinaCapital, Dragon Capital, Indochina Capital and BankInvest - are investing in resorts, real estate projects and emerging companies, taking a temporary break from securities.

Based on the above assessment, stocks prices may not increase sharply in the second half of 2007 as seen during the second half of 2006. The VN Index will likely fluctuate in the 1,000–1,100 point range with hopes it will not sink as low as 900 points. Though, falling to the dreaded 900 level is a possible scenario, particularly during the third quarter.

SME Securities predicts that if Government agencies such as the State Bank (SBV) and SSC intervene in the market - for example by postponing a few of the large IPOs in the second half of the year or ratifying new regulations during the 12th Viet Nam National Assembly that begins this month - then the index could see another bull run towards the end of 2007.

Other positive changes would include the central bank abandoning the 3 per cent cap on securities loans, or the SSC increasing foreign ownership limits.


In conclusion, market volatility is unavoidable. Smart investors should be well informed and ready for anything on the bourse. Nothing will last forever. Optimism intermixes with pessimism. But, we all agree the Vietnamese stock market is still young and has more room to grow.

Source: VNS

25% tax on securities earnings not too high

The Deputy Minister of Finance, who drafted the bill on personal income tax, Truong Chi Trung, explained why the tax rate on securities earnings should be 25%.

Some experts said that the suggested 25% tax rate on capital assignment proves to be too high. What is the basis for the compilation committee’s decision that the tax rate should be 25%?

When designing the tariff, we planned to set the same tax rate on the capital assignment and real estate assignment at 25%, to make the tariff transparent and simple. The basis for the decision is the currently applied tax rate of 28% imposed on the earnings from securities investments of institutions and enterprises (individual securities investors now enjoy tax exemption).

The compilation committee thinks that there should not be a too big gap between the tax rates on individuals and institutions, which would prompt tax evasion. In other countries in the region, the tax sums securities investors have to pay may be ½, ¼ or 1/5 of the income from capital assignment. We have considered these cases thoroughly, and decided that the 25% rate would be a suitable rate, not overly high if compared to other countries.


VAFI (Vietnam Association of Financial Investors) has proposed lower tax rates, 5%-10%. What would you say about the suggestion?

As for the income tax, it is impossible to design different tax rates for different investors. We can only impose different tax rates on residential and non-residential investors. As I have said, the too big gap between the rates on individual and institutional investors will encourage institutional investors to evade tax by assuming individuals’ names. This is a taboo in designing tax policies.


In fact, individual investors cannot get big profit as institutional investors can, because individuals do not have much experience in doing business. Do you think that it would be unreasonable to impose the same tax rates on individuals and other subjects?

As for individual investors, tax policies always aim to encourage investment. The tax designed for these investors has never been too high to keep them away from the market.

In the last few years, the state, aiming to stimulate the market, has been applying policies of tax exemption for many subjects. In fact, the collection from securities earnings has just accounted for a small proportion of the state budget collection. However, as the market develops, it would be necessary to amend the policies to make them more suitable to the new circumstances. Besides domestic investors, foreign investors have also joined the market, and it would be unfair to collect tax from foreign investors while leaving domestic investors exempt from tax.

In fact, if deducting 0.1% of transaction value for every transaction, this sum proves to be even lower than the brokerage fee investors have to pay to securities companies, now 0.5% at maximum. Foreign professional investors are still heavily investing in Vietnam, which shows that the current tax policies are suitable.

The principle of tax calculation is imposing on income (the margin after deducting the prime cost and additional expenses from the turnover). How can we calculate the additional expenses?

Investors must show vouchers, for example, the consultancy contracts, the contracts on borrowing money for investment deals. State management authorities will promulgate documents guiding the issue after the law is enacted


Could you please tell us more about the tax collection method?

When investors transfer their shares, securities companies will automatically withhold 0.1% of the total value of the assigned shares. At the year’s end, the earners have to go to taxation agencies to declare the total income and the total tax they have to pay. If the tax sums they have to pay are higher than the sums they temporarily paid, they will have to pay additional sums. Meanwhile, if the tax sums they have to pay are lower than the temporarily paid sums, they will get the tax refund. The method is now being applied for collecting tax from foreign investors.


As for the OTC market, where transactions cannot be controlled well, VAFI has suggested that the taxation bodies will collect 0.2% of the share face value. What would you say about the proposal?

In designing tax policies, there should not be the overly big difference between the policies applied to different subjects. In principle, the tax on OTC securities will be similar with the listing securities. At this moment, it seems to be difficult to collect tax from OTC securities investors. However, the situation will be different in two or three years. The OTC market will also have a watchdog, while public companies will have to register their business, and OTC share transactions will have to go via securities companies.


How will you deal with the opinions and suggestions from experts and the public on the personal income tax bill?

The compilation committee is collecting opinions from the public. On August 15, the opinions will be classified into groups for discussion.

Source: VNE

OTC warms up with first sun beam

The share price on the OTC market has recovered after a long period of falling down. Since banks, insurers and financiers announced high profit, their share prices have increased by 2-10% after a long period of falling down.

Many investors who realised that the prices of banks and insurers had dropped to the deepest possible lows decided to buy shares.

The fact that the State Bank of Vietnam allows foreign financial institutions to raise the foreign ownership ratio in local joint stock banks and the banks’ high profit both have helped the share prices bounce back, or prevented further decreases (HSBC and Techcombank have got the nod from the central bank to raise the former’s stake ratio in the latter to 15% from 10%, while the profit of EAB, Military Bank, PetroVietnam Insurance was higher than VND100bil for the first six months of the year).

Investors have found out that many OTC share items have financial indexes that are even better than the indexes of the share items on the official bourse and have been skyrocketing in price recently, including BMC, TCT, HAX, SGH and LBM.

Huy Nam, a securities expert, cited an example. PVI (PetroVietnam Insurance) is trading at VND75,000/share, just equal to ½ of the listing SGH (VND155,000/share on July 11). Meanwhile, the business result, profit and other indexes of PVI are all better than SGH.

A lot of other OTC share items are in the same situation as PVI. Experts said that the prices of these OTC items would regain their actual value once they were listed on the bourse.

The HCM City Securities Trading Centre has allowed the Tay Ninh Rubber Company and eight other companies to list at the centre. Meanwhile, the Hanoi Securities Trading Centre is going to welcome new members, including PVI, Vincom and Hoa Phat.

The news has made the OTC market more bustling in the last few days as investors have rushed to buy the share items which are going to list on the official bourse, including Tay Ninh Rubber, Thong Nhat Rubber, Thuan An Wooden Furniture, Ba Ria-Vung Tau Housing Development, and Hoa Phat Steel.

The low price proves to be the biggest advantage of these OTC shares. Tay Ninh Rubber’s shares, for example, are trading at below VND130,000/share, while Tay Ninh Rubber’s shares are considered better than Hoa Binh Rubber’s shares (HRC) on the official bourse: trading at VND180,000/share. Phu My Fertiliser, Bao Viet insurer and PVI all are selling at below VND80,000 and are believed will attract many investors.

The director of a Hanoi-based securities company said that it was the right time to buy bank shares on the OTC market as the prices are low enough for long-term investment.

Nguyen Ngoc Truong Chinh, Head of the OTC Share Brokerage Division under ACBS, said that many investors who once turned their backs on OTC shares were now paying attention to the OTC items of profitable enterprises.

A broker at Nguyen Cong Tru OTC securities market in district 1 in HCM City also said that he had bridged many successful transactions of EAB Bank, Hoa Phat and PVI – items that could not find customers one month ago.

However, only the shares of profitable and big companies have seen a price recovery, while the shares of many other items have not recovered yet; the prices of several have decreased by 30-50% over March.

Source: VNE

Will there be ‘securities fever’ at year’s end?

No evidence shows that the stock market will triumph during the end of this year as it did during the same period last year, experts say.

Dr of Economics Nguyen Quang Hung said: “Like the land fever, which is repeated only once every five years, the prices of stocks are not likely to increase sharply in the second half of the year as seen in the second half of 2006, since the current conditions are not favourable for this.”

Mr Hung said that the socio-economic and the current conditions of the stock market now were much different from those in the second half of 2006. At that time, all factors were favourable for the market boom: Vietnam was preparing to be admitted to the WTO, it organised the APEC summit, and most importantly, idle capital was profuse while the supply of securities was short.

By the end of 2006, Vietnam’s stock market had 108 listing share items only (the figure is 197 now). In 2006, investors had a lot of money and they looked for investment channels. Meanwhile, they have many choices now for injecting money. A series of IPOs have been made recently, attracting several tens of thousand billion dong (Phu My Fertiliser’s and Bao Viet’s IPO alone attracted VND10bil). Real estate projects and other sectors also prove to be good investment destinations.

Meanwhile, a huge sum of capital, analysts say, is being ‘frozen’ on the OTC market as very few transactions are being conducted at this time. Thieu Quang Thang, an analyst, said: “I think it’s unlikely that the VN Index will climb again to the 1,170 point level before the end of the year. The VN Index will many more times fall to below 1,000 and then rise again to 1,000-1,070 points as seen in the last time.”

The director of a foreign investment fund said that that he didn’t know for sure the exact time for the disbursement of the fund, because there was nowhere to inject money. There is no room for foreign investors any more in good and profitable companies, while foreign funds don’t want to make transactions on the OTC market.

The fund’s $200mil has been available to be pumped into Vietnam’s stocks. However, with the current conditions, the fund plans to make investment in real estate and tourism projects. In fact, a lot of big investment funds, including VinaCapital, Dragon Capital, Inchochina Capital and BankInvest, are injecting money in resorts, real estate projects and emerging companies, showing that the stock market is not the top priority for them any more.

Some experts previously guessed that foreign investment funds would delay their disbursement to wait for new IPOs. However, foreign investors did not buy much at the IPOs held recently (Phu My Fertiliser, Ba Ria Thermopower plant, Bao Viet, Vincom). Therefore, it is very likely that the coming IPOs will also not attract big capital from foreign investors.

Analysts have estimated that the IPOs to be held in the near future will need the huge capital of nearly VND100tril ($6.25bil). Bui Ngoc Tuoc, a securities expert, said that with such a huge capital needed to ‘swallow’ all the shares to be issued, the stock market would find it hard to regain the peak it reached in 2006.

While the domestic capital for the stock market is nearly exhausted, and foreign capital is not being disbursed, the VN Index will remain at 1,000-1,100 points, experts say.

Huy Nam, a securities expert, sharing the same view as other analysts, added that investors now were not as eager about the stock market as they were in 2006.

Therefore, the stock market will probably not see another ‘securities fever’ just yet.

Source: VNE

Vietnam International Bank to raise $93 mln in share issue

Partly private Vietnam International Bank (VIB) said on Monday it would raise 1.5 trillion dong ($93 million) in a share issue to expand its business.

The Hanoi-based unlisted bank would issue 150 million new shares, of which 13.6 million would be given as dividend payment to shareholders registered by July 18 and the remaining 136.4 million would be sold in two phases.

In the first phase, VIB would sell 35.4 million shares to existing shareholders and issue one million shares to employees.

The bank would also issue 98 million shares to shareholders and sell two million shares to bank staff by September in the second phase, it said.

The proceeds would go to upgrading VIB's infrastructure, funding lending and investing in joint ventures as well as expanding the brand name, VIB said without detailing each investment.

The bank plans to raise its registered capital to 2.5 trillion dong ($155 million) by the end of 2007 from 1 trillion dong now.

Last year, it won central bank permission to apply to list on Vietnam's stock markets.

But VIB withdrew its application for a listing licence as it decided to boost finances before floating shares in order to raise the bank's value, sources familiar with the plan said.

VIB shares fell to 86,000-88,000 dong ($5.33-$5.45) on the unregulated, unofficial markets late last week after it won a State Securities Commission licence for the share issue on June 25, from 100,000 dong prior to the licence.

The latest prices valued the bank at $540 million.

VIB had assets of 18 trillion dong ($1.12 billion) at the end of March, up 8.7 percent from the end of 2006.

Source: Reuters

Stocks in first 6 months: lots of sweet and bitter

The first six months of the year saw more ups and downs than any other period since the stock market was established: sometimes it was too bustling, other times, too quiet.

On March 12, the VN Index reached its peak: 1,170.67 points. Several days before, on March 9, the HASTC Index also hit a record when it closed at 454.81 points. These were higher figures than even the most optimistic could have hoped for.

At that time, the stock market was immersed in what was described by media and analysts as a ‘securities fever’. Experts talked much about the skyrocketing securities prices and predicted the bubble, which would cause the collapse of the stock market.

The collapse did not occur, but just one month later, on April 24, the VN Index fell to the bottom, 905.53 points, while the HASTC dropped to 284.7 points in June 2007.

Meanwhile, the OTC market has been gloomy since April 2007, and there is no sign of recovery. Most OTC share items have dropped by 20-50% in price compared to early March 2007. The bustling market once propelled investors high into the sky, and then the gloomy market eventually made them disillusioned.

However, Tran Ngoc Nam, a securities analyst, said that what happened was a good scenario, because the collapse did not occur, while both management authorities and investors have learned from the so-called ‘securities fever’.

Dr of Economics Nguyen Quang Hung shares the same view, saying that with the VN Index recovering and hovering at the 1,000-1,100 point level, the stock market shows signs of stabilising.

The stock market has been witnessing many paradoxes of share prices. A lot of questions have been raised, like “why did BMC, TCT, SGH, LBM, HAX and SFI, little known stocks, once see their prices skyrocket, while blue chips like FPT, GMD, SSI, ACB, SAM, VNM, REE, or ITA , just see their prices remain stabile or decrease?”

One time, issuing more shares was favoured by many companies as the move could help ‘kill two birds with one stone’: the issuance both could bring more capital, while companies did not have to pay interest on the capital.

However, share issuance has lately become not a good choice for companies as investors have become “full” of shares. Now, giant companies are planning to launch big sums of shares into the market: ACB with 143mil more, FPT 30mil, STB 19mil, VNM 8mil, REE 4.7mil, GMD 2.8mil. These shares seem to be being issued at an inauspicious time, as the market is presently quiet.

The first six months of the year was also the time that witnessed the trading volume reaching the highest peak in the last seven years since the market was established.

Analysts have been talking about the huge capital of several billion dollars that foreign investors are injecting in Vietnam. However, the huge capital has not been disbursed yet as there is no more room for foreign investors and the foreign ownership in many local companies has nearly hit the allowed ceiling level. In the last month, the market became quiet and the VN Index continuously fell down, leaving the market shrouded in stillness.

Many analysts have predicted the recovery of the market in the second half of the year. However, they said that the recovery would still largely depend on many issues, including the IPOs of big corporations, and improvement in the management work of state agencies.

Source: VNE

Five reasons for the cool OTC market

The prices of OTC shares have dropped by 40-50% on average since February 2007, when the market entered a new stage after a long period of heating up.

OTC shares all have been witnessing sharp price decreases, including the blue-chips. Analysts have said that banks’ shares have seen the biggest price decreases, by 40-50%, from their highest peaks. Shares of construction material companies also have seen considerable price decreases, by 30-40%, while shares of petroleum, power, mineral and securities trading companies have decreased by 20-30% in price from those seen during the February “share fever”. The price decreases have been slighter, 10-20%, for shares of financial, insurance and mechanics companies.

Analysts have identified five main reasons for the cooling of the OTC market.

First, both demand and supply are weak now on the OTC market. Investors now do not have money to buy OTC shares because they nearly emptied their pockets to buy shares in the period from October 2006 to January 2007. During that time, share prices skyrocketed, exceeding their actual values, though a lot of companies issued shares in order to raise their chartered capital.

Second, it is now the cycle of the OTC market to freeze. In previous years, the second quarter of year is always the time of freezing of the OTC market. Good information that may help stimulate share price increases is still absent at this moment. Companies have reported their business performances already; short-term investors are not braving danger at this moment by buying shares when prices are going down.

Meanwhile, the periodic falls of the official market have impacted the OTC market. Experts said that the share prices on the official bourse would further decrease before they bounced back at the end of the year.

Third, investors have been disappointed by the sharp decreases of banks’ share prices. Bank shares once accounted for 70% of the total transaction value on the OTC market, and bank share prices were once pushed up to abnormally high levels, 6-15 fold higher than their nominal value.

Fourth, investors are all anticipating the IPOs of big corporations, and they are not making deals at this moment. Moreover, they have other channels to make investment, including real estate projects, purchasing dollars and gold.

Fifth, state management authorities have warned about the big risks investors have to cope with when buying OTC shares at overly high prices. Meanwhile, the central bank has decided to limit the cash inflow from banks to the stock market by requesting that commercial banks limit lending for securities investment deals: commercial banks are not allowed have loans for securities investments in excess of 3% of their outstanding loans. Investors have been asked to pay debts, and they have more choices than selling shares to take money back.

Source: VNE

Abundance of IPOs deals blow to investors

The OTC market had not yet recovered from the two big IPOs by the Phu My Fertiliser and Bao Viet when it received another ‘blow’, the IPO of 10mil shares by PetroVietnam Insurance (PVI) on June 26.

Before the PVI auction on June 26, PVI shares were traded at VND110,000/share on OTC market. The price dropped dramatically on June 27 after the final average price of the auction at VND75,499/share was announced. On OTC websites, PVI shares are being offered at VND75,000/share.

A lot of other OTC share items got involved in the misfortune when the prices dropped dramatically and they are unsalable because investors fear that more IPOs will take place in the coming time.

PVI shares have become the obsession of many investors as they set a record in price decrease, though PVI announced impressive business performance. Le Van Hung, Chairman of PVI, said that PVI expected to obtain the turnover of VND1,768bil, or more than $100mil.

There are two ways for investors to go now, either to hold shares with the hope that the PVI share price will increase when they are listed, or to sell the shares right now for fear that the price will further decrease.

In fact, PVI’s price has decreased not because PVI’s business is bad, but because of too many commodities on the market.

Experts have warned that if the IPOs of big corporations took place in the time to come as previously planned, the supply of securities will far exceed the demand, which will result in the dramatic drop of prices and the fall of the market.

Kim Thanh, an expert with the State Bank of Vietnam’s Monetary Policy Department, said that 40 IPOs had been made so far this year, with 451mil shares sold.

Soon after the IPO by PVI on June 26, Vincom will sell 5mil of shares to the public in early July at the starting price at VND80,000/share. Other IPOs will come in August (Vietcombank), October Mekong Housing Bank (MHB), while other big corporations have announced IPOs for the fourth quarter of 2007, including MobiFone and Sabeco.

A question has been raised: do investors have enough money for the large and massive number of IPOs?

Phan Vu Hung, an investor in HCM City thinks that enterprises should delay their IPOs. He said that domestic investors would not have money to buy all the shares to be issued, especially with commercial banks limiting loans for securities investment.

Ngoc Lan, an investor on Bao Viet Securities Company’s trading floor, said that a massive number of IPOs would cause indigestion in the market and not bring much money to the securities issuers as public capital is not unlimited.

Unlike the IPOs made last year, the final prices from this year’s share auctions are just a bit higher than the starting prices. Several issuers have to organise auctions twice as they cannot sell all the shares in one auction. The Phu My Thermo Power Company, for example, had 4.8mil unsold shares after the first auction, while the percentage of Thac Mo Hydropower Plant’s shares left unsold accounted for 38%.

Tran Bac Ha, Director General of the Bank for Investment and Development (BIDV) has warned that at least six IPOs of big corporations will take place from now until the end of the year. Mr Ha said that the IPOs will make supply far exceed demand, thus badly affecting the market.

Source: VNE

Vietnam gold trader PNJ to sell $3.7 mln shares

Vietnam's gold trading firm PNJ plans to sell 600,000 new shares, or 20 percent of the company, in an auction next month to raise at least $3.7 million, state media reported on Thursday.

The Ho Chi MinH City-based firm planned to use the proceeds from the auction, reserved for strategic investors, to raise its registered capital to 300 billion dong ($18.6 million), the Saigon Economic Times quoted company officials as saying.

The auction will be held at Dong A Securities Company on July 12.

Shares in PNJ, which plans to list on a domestic stock exchange early next year, have a face value of 100,000 dong ($6.2) but are being traded in the unofficial market at about 1.1 million dong ($68).

The company, whose full name is Phu Nhuan Jewellery Company, said on its Web site (www.pnj.com.vn) it had assets of about 695 billion dong ($43 million).

Source: Reuters

Vincom to auction 5 million shares in July

Vincom JSC on June 20 announced plans to sell five million shares during its initial public offering in the third quarter on the Ho Chi Minh City Securities Trading Centre.

The book building phase of the IPO will take place on July 3, with shares entering the stock market in early August. The shares carry a face value of 10,000 VND (0.63 USD) a piece, and will be offered at 80,000 VND next month.

The IPO is part of Vincom's plans to mobilise 775 billion VND by selling 20 million shares. The remaining 15 million shares will be sold to existing stock holders at 25,000 VND a piece.

The money raised will go toward improving the company's capital position and fund future projects.

"Over the last five years, we have maintained a solid position in the real estate market," said Vincom board chairman Le Khac Hiep. "We will continue to focus on this field in the coming years".

According to Hiep, major upcoming projects include a 456-billion VND (28.5 million USD) trade and apartment complex, the 1.5-trillion VND (93.75 million USD) Long Bien Eco-Tourism Resort and a 4-trillion VND (250 million USD) hydro-electric power plant.

Hiep said competition will continue to grow in the property development and construction industries, beyond current players like Trang Tien Plaza, Big C Thang Long and Opera Business Centre.

"We still aim to be a leading property developer in Viet Nam," said the board chairman.

Vincom now has 600 billion VND (37.5 million USD) in total equity, and expects to earn a revenue of 221 billion VND this year.

On the over-the-counter market, Vincom shares are now trading around 136,000 - 140,000 VND a piece.

Source: VNA

Military Bank share issue to raise $59 mln

Vietnam's partly private Military Bank will raise 955 billion dong ($59 million) in a share issue to nearly double its chartered capital to 2 trillion dong ($124 million), the State Securities Commission said on Tuesday.

The unlisted bank based in Hanoi would sell 50,200,000 shares with a face value of 10,000 dong ($0.62) each to existing shareholders and staff in the first phase of the issue, the stock market watchdog said in a statement.

It would sell the remaining 45,280,000 shares to strategic partners in the second phase of an issue which should be completed by Sept. 19, the statement said.

Military Bank, which now has a registered capital of $65 million, is the only lender controlled by Vietnam's army and has more than 4,000 institutional and individual investors. It has not said when it plans to list on the stock market.

Its shares on the unregulated, unofficial markets fell slightly to between 86,000 dong and 88,000 dong ($5.33-$5.46) last week from 88,000-90,000 dong in the first week of June. The latest prices valued the bank at around $570 million.

Military Bank's audited net profit nearly doubled last year to 211.4 billion dong ($13 million) and its assets soared 58% to 13.81 trillion dong ($856.6 million).

The assets had risen another 10% to 15.2 trillion dong ($942 million) at the end of February.

Source: Reuters

Over-the-counter market turns frosty

After a period of strong growth from October 2006 to January 2007, the over-the-counter (OTC) market has gone through an adjustment to the point where many shares are stagnate.

So far, there is little sign of the OTC recovering in the near term, while the official market seems more stable.

Following the October-January hot streak, share prices have plunged on average by 40-50%, even blue chip stocks in key industries such as banking, insurance, and petroleum.

Many investors are finding it hard to make good deals and are willing to sell at a loss in order to restructure their portfolios.


There are a couple reasons for the OTC’s performance.

Firstly, this is a cyclical market. Similar to previous years, the second quarter is when the OTC goes through a seasonal downtrend.
In the first quarter, companies were releasing annual reports, organising shareholder meetings and announcing dividends. Moving into the second quarter, there is a slowdown in information to stimulate trading.
At the same time, the OTC is always sensitive to the official market, which too is experiencing a seasonal slowdown.

Secondly, plummeting bank shares have impacted the rest of the market.

When the OTC was going through its bull run late last year, banks accounted for 70% of the market’s daily trading value. So when the price of these blue chip shares fell, it brought about a general cooling in the market.
Earlier, bank stocks were trading at 6-15 times their face value, however due to factors such as the cyclical slowdown, investor sentiment and new capital requirements, prices tumbled.
Another technical factor impacting bank shares is the complex procedures in paying dividends via share options and new bonds, which frustrated investors who were once eager about dividends.

Most investors were short term speculators, and the primary driver behind market gains and losses; they provided liquidity.
Short term speculation is no longer in vogue as investors adjust their strategies toward medium term planning. As a result, bank stocks fell 30-50% with the OTC entering a cooling phase.

Thirdly, investors are now looking toward a few major initial public offerings including more banks and telecoms, and are looking to put their new-found wealth in other assets.

The outcome of the Dam Phu My and Bao Viet auctions have also had an impact on investor sentiment with many now questioning, "Are prices on the OTC over valued?"
From October to January, investors dumped a lot of money into the OTC market with the hope of turning a substantial profit as companies issued mass volumes of shares to increase their charter capital and prepare for dividend payments.

As a result, share prices on the OTC market surged far beyond their "real value" as short term and inexperienced investors gobbled up stocks.

These investors lacked the necessary information to assess the companies’ performance; they merely followed the herd.
Currently, investors are pouring money into real estate, the US dollar and gold. The greenback and gold have done so well that many other investors are now paying attention.

The dollar-dong rate quoted by the Bank for Foreign Trade of Viet Nam and on the black market has increased over the past few days. The main reason for the stronger greenback is commercial banks are buying more dollars to satisfy corporate demand for imports while supply is limited.
The dollar is trading around VND16,110-VND16,115, according to the State Bank of Viet Nam (SBV), while local gold prices have tracked global trends.

Finally, the State Securities Commission, SBV and other regulatory bodies are warning of risks when trading on the OTC. The Ministry of Finance has issued Circulation No 38/2007/TT-BTC on the disclosure of information by public companies, while the HCM City Securities Trading Centre passed a new regulation on share prices during a stock’s first day - both measures are aimed at lowering investors’ risk exposure.

By the same token, the new regulations also make it harder for investors to turn huge profits as they did in the past.
In addition, the State Bank of Viet Nam instructed commercial banks on May 28 to cap loans on securities investments at 3% of total outstanding debt. The decision has curbed financial assistance to securities investors and put pressure on commercial banks in collecting debts in order to comply with the regulation.

Thus to raise money to pay off debts, investors are looking to offload shares even at a loss.

Share supplies are also exceeding demand, which is forcing prices down even more dramatically.

We predict the OTC market will remain gloomy until August with prices starting to show real vitality moving into September. Until then, prices should stay fairly flat with only marginal gains.

Source: VNS

No room for cheap share items on OTC trading floors

The list of commodities for the OTC market will not include cheap share items, experts say.
In anticipation of putting OTC shares into public transaction and under State management, securities companies are trying to get ready in terms of staffs and ‘commodities’ for the market.

Experts said that there would be no room for cheap share items on the OTC share trading floors. The list of commodity items for the OTC market, which has been prepared by securities companies, will include share items with high liquidity, good prices. These will be shares of companies which have good business results and operate in fields with high growth rates.

Nguyen Dinh Phong, Director of Investment Services Division under VnDirect, a securities company, said that VnDirect was making a list of share items to be put into transaction. Its staffs are now trying to get information about the share issuance institutions so as to give assessments on the risks and possible profit of OTC shares. Mr Phong said that VnDirect’s list would include 50 share items.

A representative from Vietcombank’s Securities Company (VCBS) said that VCBS’ list of share items would include items issued by public companies that authorise VCBS to manage shareholders’ books or by the companies for which VCBS has organised share auctions. Moreover, the list will also include share items of investors which have transaction accounts at VCBS.

Securities companies all said that they would select the ‘best sellers’, especially the shares of the companies operating in banking, telecommunications, real estate, pharmaceuticals, construction materials, seafood, rubber, wooden furniture processing and transport services.

According to Mr Phong, cheap share items with low liquidity will have no place on its company’s trading floor. “We know that we can collect fees from the transactions of these share items, but we care more about the quality of services we provide to clients,” he said.

As planned, OTC shares will be transacted on securities trading floors by the end of this year, after public companies register with the State Securities Commission (SSC). However, only around 200 companies of more than 1,000 public companies had registered by the end of May 2007.

As securities companies will offer transactions of OTC shares as well as transactions of listing securities, experts have warned that they will face a serious labour shortage.

In order to help settle the problem, SSC has recently decided that those who want to get a certificate to work in the stock market just have to pass the exam to be held by SSC, while there was no need to follow the three training courses provided by SSC’s Centre for Scientific Researches and Securities Training. It formerly took 2-3 years at least to finish the three courses and get a practicing certificate.

Source: VNE

Four new partners add to MLC family

Mai Linh Joint Stock Co (MLC) brought its total number of strategic investors to six after four new investors – IndochinaCapital, Arisaig Asean Fund, Phiem Aizawa Trust and Vina Securities – joined existing investors REE and Investco.

The six strategic investors will hold 24.65% of the preferential and common shares of MLC’s equity, of which, IndochinaCapital holds 14.45% while the Refrigeration Electrical Engineering Co (REE) holds 6.27%.

Earlier, VinaCapital financed VND50 billion (US$3.1 million) worth of converted bonds for MLC, according to a statement made at the latest shareholder’s meeting on Wednesday.

At the meeting, the company announced it had posted a revenue of VND280 billion ($17.5 million) in 2006, for a year-on-year increase of 13% and an after-tax profit of VND13.5 billion (over $840,000).

The firm also increased its charter capital in 2006 from VND68 billion ($4.3 million) to VND380 billion ($24 million). This year, the company plans to raise its capital to VND980 billion ($61.3 million).

During the meeting, it was also decided that the company would convert preferential shares to public shares at a 1:1 ratio from July 1 to 17.

Source: VNN

OTC share prices plunge as investors hunt Bao Viet

The prices of a lot of OTC share items drop dramatically as investors try to sell OTC shares to buy Bao Viet’s which prove to have reasonable prices and promise big profit.

On June 4, just one day after the result on Bao Viet’s share auction was announced, investors hurried to sell OTC shares to take back money for injecting in Bao Viet’s shares. The websites specializing on OTC share trading were all full of the offers on selling OTC share. There were also the offers on selling Bao Viet’s shares at VND70-80,000 (the average auctioned price of Bao Viet’s shares was VND73,910/share).

OTC shareholders now rush to sell OTC shares, including both the little known ones, and blue-chips (banks, real estate, securities and petroleum companies). This has resulted in the dramatic decreases of OTC shares. Hoang Anh – Gia Lai, Eximbank, Mai Linh, Phu My Fertiliser, Hoa Phat Hanoi, Phu Thai, Phuong Nam Bank, An Binh Bank all saw the sharp price decreases.
On the official stock market, the VN Index dropped by 15.26 points yesterday, June 4 due to the ‘effect of the Bao Viet phenomenon’.

Trinh Hoai Nam, Director of the Brokerage Division under the Saigon Securities Incorporated (SSI) said that VND70-80,000/share would not be a high price level for Bao Viet’s shares. Investors expect that Bao Viet’s shares would increase in the time to come and that explains why they are hunting for the shares.

According to Nguyen Ngoc Truong Chinh, Head of the OTC Share Brokerage Division under ACBS, it is understandable why investors are injecting money in Bao Viet’s shares. The prices of insurance companies’ shares on OTC market are all higher than VND100,000/share, while they do not own a big brand name like Bao Viet and have worse business result than Bao Viet.

Meanwhile, experts have advised investors to keep cautious with the ‘Bao Viet’s share fever’. Huy Nam, a securities expert has recalled the Phu My Fertiliser case, where investors failed to gain the expected high profit.

Analysts said that the biggest effect that the Bao Viet’s IPO could bring was that it could pull share prices down, while setting a precedent for the IPO of other companies, which will not see overly high prices.

Source: VNE