Last updated: Thursday, April 18, 2019


Stock Market to Offer Good Choices for Investors in 2018

Posted: Friday, February 23, 2018

The State Capital Investment Corporation (SCIC) has, for the past year, successfully divested from 38 companies to take VND21,208 billion of proceeds, 19.1 times more than the original value. The margin was VND20,202 billion. Vietnam Business Forum has a quick conversation with Mr Nguyen Duc Chi, Chairman of the Council of Members of SCIC - a big contributor to the above success.

It is quite clear that SCIC's State divestment business is increasingly professional and effective, thus bringing great benefits to the State. Could you please share about this?
Since its inception over 10 years ago, SCIC has sold stakes at nearly 1,000 businesses and sold rights to purchase in 19 companies for VND27,999 billion, as 3.5 times as the cost price of VND8,084 billion. After many divestment deals, SCIC has drawn many valuable lessons and professionalised its divestment business year after year. The corporation has also contributed to completing the general legal framework.

For example, to conduct the recent sale of Vinamilk, SCIC proactively proposed to the Government, the Ministry of Finance, the State Bank of Vietnam, the State Securities Commission and other competent authorities a number of mechanisms to facilitate investors to participate in the bid like exempting public offer requirements, allowing late submission of transaction codes (with the longest extended time of 15 days after the date of payment), allowing deposits in foreign currencies, and allowing escrow transactions at all authorised banks (deposits in only Vietnamese dong were allowed in 2016), using deposits as a part of full payment on the date of payment (in 2016, investors had to prepare 100 per cent of the deal value at hand on the date of payment and 10 per cent of deposits were refunded after the deal was concluded).

In addition, SCIC asked the Ministry of Finance and the Government to allow full-block share sales in listed companies because, in some cases, majority shareholders are only interested in buying a part of SCIC’s stake to hold the controlling ratio and the rest will be difficult to sell to others. For example, if SCIC wants to sell 40 per cent stake while another shareholder is also holding 40 per cent of interests, the latter may probably buy only 11 per cent from SCIC to keep the controlling stake and it will be much harder to sell the remaining 29 per cent at good prices.

Looking from the perspective of capital market, the sale of Vinamilk shares helped the stock market to stage a longer rally, which boosted the VN-Index towards 1,000 points at the end of 2017. This is a good chance to divest and equitise State-owned enterprises (SOEs) and attract foreign funds into the Vietnamese stock market.

The stock market will have more high-quality listings in 2018 when SCIC submits divestment plans for the year based on the decision of the Prime Minister. Would you be kind enough to tell us more about this?
The Prime Minister adopted Decision 1001/QD-TTg ratifying SCIC's enterprise arrangement and classification to 2020. Accordingly, SCIC will sell State capital in 132 companies from 2017 to 2020.

Based on this decision, in the first months of 2018, SCIC will officially submit and approve the divestment plan for 2018. Basically, companies that had divestment plans prepared in 2017 like Vietnam Construction and Import-Export Joint Stock Corporation (Vinaconex), Binh Minh Plastics Joint Stock Company, Domesco Medical Import - Export Joint Stock Corporation and FPT Corporation will be done first. According to the guidance from the Government, this year, the State will divest from PetroVietnam Power Corporation (PV Power) and PetroVietnam Oil Corporation (PV Oil). When they are floated, we hope these stocks will spur the stock market and attract much attention of big investors, thus ensuring good interests for the State.

What about SCIC's investment activities?
SCIC is a State-owned corporation which invests on the principle of preserving State capital and making it profitable. Thus, its investment decisions are very cautious in an unpredictable market. I think that different and appropriate investment opportunities are considered by SCIC, but financial investment is best for the time being. Therefore, SCIC will seek investment opportunities together with other specialised investors and join with them in good deals. In addition, SCIC will use financial instruments in capital and securities markets to invest in income-fixed instruments such as bonds or bank-guaranteed corporate bonds. SCIC will choose to maximise capital efficiency.

We can still consider investing in good business private companies if we find them effective. For example, SCIC has also pooled investment capital with potential businesses like REE Corporation. I mention this because I want to stress that SCIC’s investments are considered legitimately. If they prove effective, investments will be taken into account.

Also relating to SCIC's divestment plan, could you tell us how the capital transfer process at companies obliged to transfer their capital to SCIC will be sped up?
The Decree 147/2017/ND-CP, signed by the Prime Minister, adds regulations on the time limit on transfer of State capital for specific types of enterprises, where wholly State-owned enterprises equitised must transfer State stake to SCIC within 30 working days from the date the Ministry or Provincial People’s Committee that administers them completes the announcement on second state capital.

In case no decision on announcement of second State capital value is made at the time of transfer, the value of State capital transferred will be based on the value approved in the equitisation scheme or according to decisions on changes to scale and structure of authorised capital of equitised enterprises.

This decree also stipulates treatments to intentionally delayed or slowed cases. They must be held responsible to the Prime Minister and for emerging financial and related losses (if any) according to the law.

SCIC is actively working with ministries and Provincial People's Committees having enterprises to transfer to strictly comply with regulations on transfer of State capital under the direction of the Prime Minister.

If the process of State capital transfer to the SCIC is quicker and stronger, it is likely that SCIC’s divestment portfolios will have new names and create new share supply sources on the market.

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