Firms plan capital infusion, analysts worried

Friday, May 2, 2008
Many companies have announced plans to increase their chartered capital by hitting the market again or making rights and bonus issues, a move that is causing concern about its effect on the stock market.
Unlisted Saigon Hanoi Commercial Joint-Stock Bank, or SHB Bank, received shareholders’ approval last month for increasing its chartered capital from VND2 trillion (US$124 million) to VND4.5 trillion through a right issue next month.

It will offer existing shareholders shares at par in a ratio of one for every two shares held.

The bank also plans to convert its convertible bonds into equity, also at face value and in a similar ratio next December.

General director Nguyen Van Le said the bank was keen to boost its capital adequacy at a time when the country was integrating globally.

“It will [also] enable us to expand operations, set up a financial leasing company, a securitization firm, and infrastructure investment and development companies nationwide,” he added.

Vietnam Construction Import Export Corporation, or Vinaconex, plans to double its chartered capital to VND3 trillion ($186 million) by issuing fresh shares, while Bien Hoa Sugar, a manufacturer of white refined sugar, wine and spirits, will issue bonus shares in an unspecified ratio.

South Rubber Industry Company received approval at its shareholders meeting for a three-for-one bonus issue.

But these companies’ plans are worrying some analysts.

An expert from IPA Investment Corporation, who wished to remain unnamed, said it was likely to hurt the already gloomy market by increasing supply.

The HCMC market has fallen by more than 43 percent this year.

Investors are also concerned about the way many firms spend the money they raise from share issuances to buy stakes in other companies.

“Dozens of listed firms suffered heavy losses last year [in this manner],” an investor in HCMC said. (Thanh Nien)