Despite the nationalisation of three Vietnamese banks due to the entire capital loss and bad debt warnings from the start of this year, bank stocks have maintained high growth momentum. Can bank stocks be the hottest picks in the coming time when the market has more attractive stocks?
Galloping en masse
Before the “Black Monday” (August 24), four out of eight listed lenders, namely Vietcombank (VCB ), BIDV (BID), MB (MBB) and Vietinbank (CTG) rose nearly 49 percent on average in the first 6 months. Specifically, BID surprised investors when it climbed from VND12,700 to VND27,400 on July 7. Perhaps, a majority of investors could not imagine that the giant lender in the reshuffled sector more than doubled in just half a year.
VCB also surprisingly soared from VND30,000 to VND55,000 in July 2015. The market capitalisation of VCB currently topped the Vietnamese stock market, exceeding US$6 billion. VCB is undeniably a good bank but the nearly double increase in a short time is unimaginable to the masses.
Likewise, CTG also sharply surged over 70 percent, MBB and Asia Commercial Bank (ticker: ACB) increased 22 percent and 55 percent in the year to mid-July, respectively.
However, other lenders had to struggle to keep their values on the market. Eximbank (EIB) withstood many storms caused by countless rumours or Sacombank (STB) was rated less optimistic after its merger with Southern Bank. It was said that Sacombank will bear bad debt burdens of Southern Bank. Hence, its stocks, STB, which used to be a very hot pick, cooled down and fell.
Room unfilled or filled?
Mr Nguyen Hong Khanh, Research Director at Sacombank Securities Company (SBS), said that, after wide volatility, securities brokerage, food, consumer good and technology companies will lead the market up-trend as they are not heavily affected by market fluctuations. Bank shares may further rise steadily but their paces may not as high as earlier. Banks have strong weight in the index bracket. In addition, many companies will raise funds in the third quarter and big waves may come from these issuers.
At present, banks seemed to lose steam at the back of strong gains. Price to book value (P/B) ratio of VCB was nearly 3 times, a relatively high rate in the banking sector. BIDV faced a significant dilution after it hiked capital to meet high financial needs. Vietinbank also lacked catalysts for a continued advance because of current low provisions and existing problematic assets.
Another risk to banks is “bad debt.” Worse, three banks were nationalised after they lost all share capital while their reports were not so bad earlier. These realities shunned many investors on the stock market.
Easing ownership room at banks needs time
Decree 60 on easing foreign ownership limits officially took effect on September 1. However, cash flows from both domestic and foreign investors appeared to be quite indifferent. Even, securities companies - the first sector to be approved to have 100 percent foreign ownership - saw weak liquidity.
According to the latest proposal from Vietinbank, State holding ratio will be gradually reduced as scheduled but it will be still above 51 percent to ensure State control.
According to some experts, the proposal by Vietinbank is reasonable but it seems hardly feasible at least this year. No lenders raised foreign ownership ratio above regulatory rate, even joint stock banks.
For top 4 banks like Vietinbank, BIDV and Vietcombank, the foreign ownership easing needs even further calculation.
TP
Vietnamese
