Exploiting from Int’l Capital Markets: Opportunities for Vietnam’s Enterprises

Because of national economic difficulties, it is currently hard for enterprises to get loans. Therefore, many of them have turned to international markets for capital. This not only eases financial problems but also shows the self-confidence and firmness of Vietnam’s enterprises, who are stretching out to the immense sea.

 

Exploiting capital from the international markets has been carried out by Vietnam’s enterprises for years. VinCom was the pioneer when this corporation raised successfully US$100 million from the international bond market in 2009. Although the year of 2011 has seen enormous challenges in the international economy, VinCom for the second time succeeded in selling an additional US$40 million in international bonds with the interest rate of 6 percent a year in July 2011. The raised money will supplement VinCom’s working capital. It is a meaningful amount of money because VinCom is craving for capital to carry out its large-scale real estate projects and other long-term investments. Thanks to this capital, Vincom’s projects have been regularly conducted despite current market difficulties.

 

With these successes, VinCom is considered one of the most experienced enterprises which has raised capital from international markets and opened a new direction for Vietnam’s companies.

 

Following Vincom’s successes, in May 2011, Hoang Anh Gia Lai (HAGL) also managed to raise US$90 million international bonds of 5-year maturity at a fixed interest rate of 9.875 percent. This event was considered a glorious success for domestic companies when this enterprise mobilised a huge source of capital under the hard circumstance of international financial markets.

 

With financial advantages, HAGL has pushed buying cheap projects from enterprises in financial trouble in order to create advantages for its activities later on. It is acknowledged that besides mentioned capital, since the end of 2010, this company has realized the difficult situation and gathered all its fundraising resources. At the end of August 2011, HAGL managed to mobilise US$50 million from the Tasasek Corporation, and US$60 million from Deutsche Bank. HAGL is expected to raise an additional US$55 million from Temasek. Those corporations are known as international financial institutions, not only territorial ones.

 

Mr Doan Nguyen Duc, Chairman of HAGL, shared that it was hard to raise capital domestically due to high interest rates. At the meantime, interest rates of international bonds are expected to reach just 8 to 10 percent. Moreover, enterprises have the right to redeem their bonds within 3 years from the date of issuance.

 

Many enterprises have also found new directions to access world financial markets when selling their shares for foreign companies. This method has been used by many banks because of difficulties in raising capital domestically. ABBank is a typical example, twice succeeding in mobilising capital by this method. In 2008, ABBank managed to sell 15 percent of its shares at a price five times higher than face value for Maybank, the largest bank of Malaysia, earning VND 2,138 billion. In tough times, its success helped ABBank have more resources to thrive in the next stage. In 2011, Maybank bought an additional 5 percent of shares to maintain the maximum rate of 20 percent of ownership for strategic foreign partners. ABBank also raised VND 600 billion from the International Fund Corporation (IFC) of the World Bank (WB). With its investment, IFC became an official shareholder possessing 10 percent of ABBank’s chartered capital. Thanks to capital gathered from foreign partners, ABBank has not only succeeded in raising capital but also become a bank of strong financial potential in the market.

 

In times of economic difficulties, many banks have failed to fulfil the requirements of raising their chartered capital to VND 3,000 billion; however, there are also banks who managed to meet those requirements thanks to successfully raising foreign capital.

 

Among mentioned banks, OceanBank (OCB) has sold part of its shares to BNP Paribas (PNPP) in order to raise its total capital from VND2,600 billion to VND3,000 billion. VIB has also been approved by the State Bank of Vietnam (SBV) to enlarge its chartered capital from VND4,000 billion to VND4,250 billion through selling shares for Commonwealth Bank of Australia (CBA), which raised CBA’s ownership percentage from 15 percent to 20 percent. Similarly, Mekong Bank sold to its strategic foreign partner Temasek Holding Pte. Ltd (Singapore) 15 percent of its shares which is expected to rise to 20 percent this year in order to raise Mekong Bank’s chartered capital to VND3,000 billion.

 

According to financial experts, although the international capital market is immense and there are chances for all enterprises, raising capital in this market is no easy task. The most important thing is that enterprises have to persuasively demonstrate their values and prestige. Moreover, the top concern of foreign investors is transparency in business management in Vietnam. Foreign investors tend to invest in a long term. Therefore, they always highly appreciate enterprises which are transparent in providing information, both good and bad, in order to help investors make decisions and estimate probable investment risks.

 

According to economic experts, in order to succeed in mobilizing capital from world markets, enterprises are obliged to provide information and reports on planned business, financial restructuring, personnel, and projects to ensure feasibility and efficiency. They should also consult regularly with foreign investors, helping them to grasp information and understand enterprises, building prestige. Processes must be restructured in a way that is regarded by foreign investors as transparent. They must also be suitable for foreign investors from whose market enterprises will raise capital. Despite the difficulties, opportunities for Vietnamese enterprises are still very large.

In fact, all banks which have foreign partners manage to create competitive products and services, and improve banking technology. On the other hand, the foreign partners also make large profits due to investing in Vietnam’s banks. Increasing cooperation to get more support from foreign partners in this field is very necessary for many of Vietnam’s commercial banks. However as for foreign banks, they have also fulfilled their expectations of profits and market shares.