Increasing Supplies for Vietnam's Stock Market

“State stakes in big companies will be sold,” Le Song Lai, Deputy General Director of State Capital Investment Corporation (SCIC) affirmed in an exchange with Vietnam Business Forum at the 2^nd Vietnam Investment Forum.

Set up in 2005 with initial chartered capital of VND5,000 billion (US$312.5 million) growing to VND30,000 billion (US$1.88 billion), SCIC is entitled to receive and represent ownership of state capital invested, State-run one-member limited liability companies, limited liability companies with one or two members, and joint-stock companies transformed from independent state companies or newly established ones.

 

At present, the supply-demand balance on the stock market is overwhelmed by buyers. As the holder of State capital in more than 200 enterprises, does SCIC have any plans addressing this imbalance?
Among 200 SCIC-holding companies, SCIC only manages State capital in 17 listed companies. When the stock market is heated, we carefully consider selling more State stakes. However, founding stakeholders are forbidden from selling their stakes to the public within three years, they can only be sold to other founding shareholders. Besides, before they sell their stakes, they must send reports to relevant bodies. When big shareholders sell out their stakes, the price of those shares will fall. Founding shareholders will suffer the loss first and then other shareholders.

 

In addition, SCIC selling stakes will make other investors wonder why SCIC wants to change ownership of its stakes, and they may suspect business difficulties. Without meticulous and correct steps, enterprises may be seriously affected. With its role, SCIC must calculate long-term benefits, not pursue short-term profit.

 

This does not mean that SCIC will still keep all State stakes, but that it will weigh up ownership change. Two moths ago, SCIC sold 600,000 shares in a plastics company to 2-3 big investors on the negotiation basis. This year, we plan to sell shares worth some VND270 billion (US$16.88 million) in 55 enterprises.

 

Apart from selling stakes, would you mind revealing any plans to list SCIC-held enterprises on the stock market?In 2007, we plan to send at least 20 SCIC-held enterprises to bourse. Normally, SCIC keeps 30-35 per cent of capital in those companies. Our viewpoint is that eligible enterprises should be listed. We have worked with the leadership of those companies, helping them build listing roadmaps and seek domestic and foreign investors to improve their business administration and financial situation before listing.

 

Is there any SCIC-dominated company planning to list shares on overseas stock markets?
At present, only Vinamilk explicitly wants to list abroad, while other companies are considering. Basically, we advocate overseas listing. However, many people wonder why they want to issue shares abroad while the domestic capital channels are very wide. I think overseas listing will bring more benefit for the listed firms in terms of trademark and capital raising fees.

 

VinaCapital and other funds temporarily suspended buying listed stocks to consider other plans. In the short term, the market is heated, but there is no sign of possible bubbling of collapse soon. Under market rules, there will several corrections from now until the year’s end. Foreign hedge funds have not entered Vietnam because the market size is not big enough. The Vietnamese stock market is hot, not because of foreign investors but Vietnamese retail investors who are racing to buy stocks without paying attention to the business situations of the listed firms.

 

In my opinion, there are still a lot of investment opportunities in the coming time. Many newly equitised companies are in very good position. The most important matter is how investors assess stocks and how they decide to buy stocks before they become hot. Besides, investors should also know when to put money in and when to draw it out.

 

Indochina Capital has a goal of becoming a strategic investor in leading Vietnamese companies, focusing on the fields of retail, consumer goods and information and communication technology. Every month our specialists approach some 20 companies to seek business opportunities. Investment opportunities are still available.

 

The Vietnamese stock market has developed so quickly within the last year, from US$2 billion market capitalisation to over US$20 billion. This has worried Vietnamese policymakers, but some proposed measures, like a tax on capital gain or tight management over capital inflows and outflows, will discourage investors. In my opinion, if capital investment controls are applied, foreign investors will quit the market. Hopefully, the Vietnamese Government will apply policies increasing supply to ease investors’ thirst for stocks, by speeding up the equitisation of State-run companies and removing all limits on foreign investment in the coming time.
Quynh Chi