Investor association calls for change to bank stock selling rules

Sunday, May 18, 2008
The Viet Nam Association of Financial Investors (VAFI) has sought the government’s approval for private banks to sell 5% stakes to foreign investors without asking for central bank approval.

The move was made in a bid to halt a slump in bank stocks, the association said.

“Share prices of banking stocks plunged dramatically,” VAFI General Secretary Nguyen Hoang Hai told.

“Many stocks nosedived close to their face value [VND10,000], some even fell below that. Many bank shares lost 70 to 80% compared with the price offered to foreign strategic partners.”

“The share price of Vietcombank, Vietnam’s third-biggest commercial bank by assets, on the over-the-counter (OTC) market is around VND32,000, half the preferential price offered to bank staff.

“Employees of state-run banks, which were equitized over the last two years, will suffer more heavy losses if the share prices fall further.”

Hai also said Prime Minister Nguyen Tan Dung had earlier ordered state-run banks to halt selling collateralized shares and encouraged private banks to follow to help stop the stock market slump.

At the outset, all state-owned banks complied with the order but some state-run banks then sold collateralized shares in listed companies through investors’ accounts and asked dealers to sell unlisted stocks shares for them as they needed to settle debts of those shares.

“So VAFI is determined to seek the prime minister’s approval for allowing commercial joint stock banks to sell 5% or less [out of the 30 percent stake that foreigners can hold] to foreign investors without asking for the central bank’s permission,” Hai said.

He also said VAFI’s petition was an ad hoc measure – to apply for the next one or two years – aimed at raising the market’s liquidity.

“If our petition is approved, private banks will be able to buy back their shares to sell to foreign investors to halt a share price slump.”

“Buying back shares will enable the private banks to support their existing shareholders, as well as raise money more easily,” the association’s general secretary said.

VAFI estimated the total value of collateralized shares on the OTC market was more than VND10 trillion (US$623 million), so buoyancy would be restored on the informal market when banks settled debts of those shares, helping to lift the main markets.