Foreigners still banking on Viet Nam

Friday, May 16, 2008
There are many factors that indirectly support bank share prices. Foreign investors, still believing in domestic banks, continue to buy bank shares.
The prices of king shares (a term used to denote bank shares) have been dramatically decreasing on the official stock market since early May with prices now below face value.
However, experts say that the situation will improve soon as there are many factors that support bank share prices.
ACB and Sacombank, two listed banks, have announced satisfactory business results for April. Meanwhile, unlisted banks have also announced good news.
VP Bank said that OCBC, the third-biggest finance group in Singapore, and VPP Bank have reached an agreement on increasing the Singaporean partner’s ownership ratio in VP Bank from 10% to 15%. The noteworthy thing is that VP Bank’s shares are now offered for sale at a price 1.1 times higher than the face value on the OTC market. Meanwhile, the shares have been sold to the foreign shareholder at a price 4.5 times higher than the face value.
The price OCBC paid for the deal shows the confidence of the foreign partner in the potential of the Vietnamese partner, despite the big difficulties Vietnam’s economy is facing.
Sources say that earlier this week, Hong Kong and Shanghai Banking Corporation (HSBC) reached a preliminary agreement with Techcombank on raising HSBC’s ownership ratio in Techcombank to 20%. The price of shares has not been revealed, but Techcombank’s representative said that the price is high enough to satisfy shareholders, which truly reflects the value of the bank and its development prospects.
Meanwhile, the Malaysian partner of An Binh Bank, Maybank, has announced a plan to raise its ownership in An Binh to 20%, and a plan to support the bank in technologies and service development.
It has been asked why domestic investors are trying to sell bank shares while foreign bankers are paying high prices to purchase them.
With the aim of stopping bank share prices from sliding, the Vietnam Association of Financial Investors (VAFI) has proposed that the State Bank of Vietnam allow joint stock banks to sell stocks, not higher than 5% of chartered capital, directly to foreign investors without having to ask for permission from the State Bank.
According to VAFI, those foreign finance institutions and investment funds that wanted to buy bank shares could directly contact the management boards of banks in order to negotiate prices and fulfill procedures for the share transfer deals.
VAFI said that bank shares remain the priority in the investment portfolios of foreign investors. If the mechanism was more open, foreign investors would have more opportunities to join the market, which would help share prices recover. (VNE)