Vietcombank's counterparty credit rating outlook cut to negative - S&P

Saturday, May 3, 2008
Standard & Poor's Ratings Services said it cut the outlook on its counterparty credit rating on Bank for Foreign Trade of Viet Nam (Vietcombank) to negative from stable and affirmed the counterparty credit rating at 'BB/B' following the revision on the outlook for the sovereign credit rating on Viet Nam.
The ratings agency said the action reflects the bank's systemic importance in the Viet Nam banking system such that its ratings would qualify for a two-notch uplift from its standalone rating of 'B+'.
However, the counterparty credit rating on Vietcombank would move downward with the sovereign credit rating as implicit government support cannot raise the rating on the bank above the foreign currency sovereign rating, the ratings agency said. (Thomson Financial)

Standard Chartered Adds to Asia Commercial Bank Stake

Saturday, May 3, 2008
Standard Chartered Plc, the U.K. bank that makes most of its profit in Asia, raised its stake in Asia Commercial Joint Stock Bank (ACB) to fifteen per-cent to tap growth in Viet Nam.
The London-based bank bought an additional 6.16% of shares and 7.10% of convertible bonds from International Finance Corp., the company said today in a statement. The purchase almost doubled Standard Chartered's holding in the Asian lender to 15%, compared with 8.56% it owned in December.
Standard Chartered, which has spent more than $2.7 billion in acquisitions since 2006, is seeking purchases and investing in its units as U.K. peers retrench amid higher funding costs and credit-related writedowns tied to the U.S. mortgage market. It gained a license to incorporate its Viet Nam unit locally last month, allowing it to open multiple branches and speed expansion in one of Asia's fastest-growing economies.
The increased stake will allow Standard Chartered ``to further strengthen its relationship with ACB, as well as benefit from the growth and development of the economy in Viet Nam,'' Standard Chartered said. Standard Chartered, which has held a stake in ACB since 2005, said Vietnam is a ``key market.''
Standard Chartered rose 2.7 percent to 1,880 pence in London trading, bringing its market value to 26.5 billion pounds. Asia Commercial Bank declined 1.4% in Hanoi trading, extending its loss in the past six months to 55%. (Bloomberg)

Chu Thoi 620 Concrete reports 706.877b dong in total asset

Saturday, May 3, 2008
Listed firm Chau Thoi 620 Concrete Joint Stock Co reported that by the end of 2007, it reached 706.877 billion dong in total assets, 689.934 billion dong in revenue from sales and service provision, 55.497 billion dong in combined profit from sales and service provision.
Also the company earned 23.095 billion dong in revenue from financial activities, 48.861 billion dong in total pre-tax profit with CIT of 11.350 billion dong.
Its EPS reached 3,690 dong while the dividend was 18%.
Meanwhile, the company spent 8.056 billion dong on financial cost, 16.264 billion dong on corporate administration cost and 1.287 billion dong on other costs.

REE reports 106b dong loss in Q1

Friday, May 2, 2008
The Refrigerating and Electrical Engineering Shareholding Co (coded REE) recently announced its business result in the first quarter of this year with 275.26 billion dong in revenue, equalling to 149% in comparison with the same period of last year, losing 106.15 billion dong.

In the explanation document sent to the State Securities Commission (SSC), REE reported that the company lost in the first quarter due to it set aside of 160.68 billion dong for finance standby for shares with decreasing market value in comparison with the prices are being accounted on books up to March 31.

The difference between the company's total finance investment portfolio up to March 31 and the market value was 341 billion dong. Particularly, up to the end of March, the company's total finance investment capital reached 1.377 trillion dong and capital market price was 1.719 trillion dong.

This year, REE targets to earn 1.1 trillion dong in revenue and 420 billion dong from pre tax profit.

DongA Bank (EAB) reports performance

Friday, May 2, 2008
Eastern Commercial Joint Stock Bank (DongA Bank - EAB) was formed in July 1992 with the initial chartered capital of 20 billion dong that now has been risen to 1.6 trillion dong. This year the bank will issue 180 million shares at 10,000 dong par to hike the chartered capital to 3.4 trillion dong.

Up to the end of last year, the bank issued over 1.8 million cards with nearly 900 ATMs and 1,500 payment points nationwide.

Big shareholders of the bank are HCM City's financial administration committee, PNJ, Phu Nhuan Housing Construction and Trading Co, Viet Tien Garment Corp, Sabeco, and Sasco. In addition, EAB has two members including EAB Securities Co and EAB Overseas Remittance Co.

By the last year end, EAB's total operational capital reached 26.961 trillion dong, a rise of 23% year-on-year, in which the credit capital accounted for 3.141 trillion dong. Total deposit attained 21.516 trillion dong while its outstanding loans totalled at 18.010 trillion dong and total pre-tax profit was estimated at 454 billion dong, growing by 126% yoy.

In 2008, EAB targets to reach 40 trillion dong in total operational capital, 26.5 trillion dong in deposit balance and 700 billion dong in pre-tax profit.

TNG to scale up chartered capital to 100b dong

Friday, May 2, 2008
TNG Trade Joint Stock Co (coded TNG) announced that it would raise its chartered capital to 100 billion dong via offering 4.75 million more shares.

Particularly, 2.715 million shares will be offered to the existing shareholders, 271,500 shares will be sold to the company's employees and 1,583,500 shares will be allocated to the other investors.

The capital being raised from the share offering is to support business capital and invest in some projects like TNG Cong River plant project in the second phase, TNG Phu Binh plant's branch project, Tan Dong Pho Yen industrial zone project and Viet Thai trade centre project.

In 2007, TNG earned 343 billion dong in revenue, exceeding 4.9% against the year's plan and up 86.4% from 2006, 17.1 billion dong in profit, a year-on-year increase of 191% and planed to pay dividend of 16%.

This year, the company targets to bring the figures to 733 billion dong in revenue, increasing 114% yoy, 28 billion dong from pre tax profit and 27 billion dong from after tax profit, up 58% from 2007.

SDA to pay dividend in shares

Friday, May 2, 2008
Simco Song Da Joint Stock Co (SDA) recently passed the plan to offer 3.5 million shares to hike its chartered capital from the current of 70 billion dong to 105 billion dong.

Of which, 700,000 shares will be offered to pay for the 10% dividend for the second phase of 2007, 1.4 million bonus shares will be allocated to the existing shareholders at the ratio of one new share for five shares held and the remaining 1.4 million shares will be sold to the strategic shareholders at the offering price of 10,000 dong per share.

The capital being mobilised from the shares issue will be invested in Phung Hiep industrial zone project valued at 23 billion dong in Ha Tay province's Thuong Tin District and 12 billion dong in Dak Doa Hydropower Joint Stock Co.

Last year, SDA made a revenue of 121.8 billion dong, 32.17 billion dong from pre tax profit and plans to pay 2007 dividend of 20% that could be 200.6 billion dong, 37.2 billion dong and 20% this year respectively.

Lam Dong foodstuff firm to double chartered capital

Friday, May 2, 2008
Lam Dong Foodstuff Joint Stock Co (coded VDL) plans to double its chartered capital from the current of 12 billion dong to 24 billion dong through offering 1.2 million shares.

In particular, 900,000 shares will be offered to the existing shareholders at the ratio of 75 new shares for 100 shares held at the price of 18,000 dong per share, 60,000 shares sold to the company's employees at 25,000 dong per share and the remaining 240,000 shares allocated to strategic partners at the price equalling to 80% of average trading price of five consecutive trading sessions on the Hanoi Securities Trading Center (HaSTC) before the share issuing date.

Last year, VDL posted 151.845 billion dong in revenue and 9.223 billion dong from pre tax profit.

This year, the company plans to bring 175 billion dong in revenue, over nine billion dong from pre tax profit and pay 18% dividend.

Seeking ways out of stock market slumber

Friday, May 2, 2008
Viet Nam's stock market has unexpectedly gone ups and downs over the last year. The market has prevailingly witnessed downward corrections, especially since the start of this year. VN Index by April 23 dropped to 523.25 points, down by 40.8% against the lowest level in 2007, down by 73.2% against the highest level and down by 55% against the average level.

Commercial banks had ever reported the highest securities loans of up to 20 trillion dong, accounting for some 1% of their total assets worth 200,000 trillion dong. Currently, total securities loans at commercial banks was only about 9-10 trillion dong or 0.5% of total assets of banks because banks have been striving to collect securities debts, which has made the stock market further slash. According to PhD. Le Xuan Nghia, director of the central bank's banking development strategy department, the ratio of securities loans is not high.

Meanwhile, the government has instructed the central bank to offer discount loans with an interest rate of 9% a year when commercial banks are temporarily short of liquidity. After the stock market had continuously increased mainly because of the narrowed trading band, the market has constantly slashed due to the expanded trading band. Many shares have been offered for sales at floor prices right after the trading band is expanded. It is reasonable for investors to worry over banks' further lifting share-mortgaged loans. Particularly, when banks are meeting with difficulties in raising deposits, without lifting share-mortgaged loans, banks will be vulnerable to high risks. Meanwhile, investors have no money to supplement for securities deposit. If investors borrow capital from banks, they will have to accept high interest rates. However, if investors sell shares, they will loose all. Six months ago, investors could borrow 60 million dong if they mortgaged 1,000 REE shares worth 150 million dong. No-one could think that the price of REE shares was now only 52,000 dong a share.

Over the last time, prices of a series of blue-chips such as REE, SAM, GMD, FPT, SSI and so on, which have been most mortgaged, went down to unexpected levels, making VN Index continuously slash.

In fact, if hundreds of residents, who mortgage their land-use right and house ownership certificates to borrow loans from banks to invest into production or business activities, cannot pay debts due to their business or production failure, banks will find hard to collect debts or lift mortgage because banks cannot ask debtors to go out their houses. However as for securities mortgage, banks will be able to sell shares mortgaged by hundreds of investors at floor prices.

Nevertheless, in order to prevent a wave of lifting share mortgages, the central bank must take actions to intervene into such a move instead of offering banks discount loans with an interest rate of 9% a year. The central bank will use the discount loans to extend due securities mortgage contracts or repo. Commercial banks borrow capital from the central bank with an interest rate of 9% a year, and then extend contracts for investors with an interest rate of 12% a year or less. Investors, after suffering from heavy losses for some months, will feel secured partly with a preferential interest rate. With the current outstanding securities loans, if share-mortgaged loans in the OTC is deducted, the amount of money that the central bank lends is not big.

If several years ago investors found hard to seek information about companies, the domestic and foreign stock markets, now they are facing up massive information from different sources such as TV, internet, newspapers, which make investors feel confused. As a result, investors have recently sold both good and bad shares and VN Index topped among decliners in the world. Meanwhile, the US Stock Exchange amidst the economic recession time has seen little reduction. Namely, Dow Jones Index dropped by only 1,300 points or 10% against the highest level of 14,000 points. (DTCK)

La Nga sugar plant chairman burnt by securities

Friday, May 2, 2008
Shareholders of the Dong Nai-based La Nga Sugar Company on April 29 signed a petition which was filed with the Ministry of Agriculture and Rural Development, the Steering Committee on Fighting Corruption, and the Ministry of Finance to report about illegal activities of Pham Nhu Hoa, Chairman of the La Nga Sugar Company.

The shareholders said that as the Chairman of the Management Board of La Nga Sugar Company, Hoa used VND16.84bil of the company to play the stock market. However, as the market has been falling, Hoa asked for a delay to pay his debts, promising to pay debts by the end of 2008.

It is now the time for La Nga Sugar Company to organise the 2008 annual shareholders’ meeting. However, the meeting has been cancelled due to the scandal.

The stock trade affair by the chairman of La Nga Sugar Company was exposed when the company on April 9 sent a letter to its shareholders to attend the 2008 annual shareholders’ meeting, expected to take place on April 22. However, several days later, Hoa released a notice on postponing the meeting. A lot of shareholders demanded an explanation from the company and they did not receive legitimate reasons.

On April 18, the company’s management board organised a meeting during which participants heard Hoa admit using that sum of money to purchase stocks in his name.

Le Tai Anh, Chief Accountant of La Nga Sugar Company, said that Hoa has violated the current regulations in using the company’s money for private business. However, he said that his behaviour should be sympathised with.

However, the company’s shareholders do not agree with Anh, saying that Hoa’s behaviour violates the current financial laws and deceived shareholders. The shareholders have asked to know who lent a hand to Hoa in the stock trade deal.

Moreover, the shareholders also said that they had heard about many dubious affairs in the company. For example, the La Nga Company has been renting a confectionary production line to the Northern Food Corporation at VND230mil a year. However, it remains unclear how the money from the rent has been used. (Tuoi tre)

Vinatex may fall short of targets

Friday, May 2, 2008
Viet Nam Garment and Textile-Group (Vinatex) may not meet its targets this year because of the rising price of raw materials, according to its chairman, Le Quoc An.

Rising production costs are hurting textile and garment enterprises, especially the dramatic increases in coal, oil and petroleum.

And the price of raw materials, such as cotton and other fibres, has also increased by an average of 20%.

According to a recent Vinatex survey, so far this year, rising fibre prices have lifted production costs by VND40bil (US$2.5mil). Cotton prices alone are costing the firm additional VND284bil ($18mil). Another VND50bil ($3mil) is lost to high petroleum and coal prices.

Altogether, these increases will push Vinatex production costs up by an additional VND800bil, said An.

To deal with the high prices, Vinatex is trying to cut down on costs while boosting labour productivity. An said it was necessary to use more domestic materials and limit production losses to 5-10%.

Despite the challenges, Vinatex still wants to expand through selecting investment projects and expanding its export market. It is also considering investing VND11.39tril ($712mil) this year on expansion.

The group will spend more than $344mil to expand production and more than $318mil in industrial-zone and property-development projects.

The country's textile sector as a whole earned nearly $7.8bil in export turnover last year. The sector is expected to make $9.5bil in 2008.

New raw material source

Vinatex has recently set up the Viet Nam Textile Materials Production and Trading Joint Stock company (VinatexMat) with a charter capital of $12.5mil.

The establishment of VinatexMat, which specialises in producing and trading raw textile materials, is aimed at creating a source of raw materials for the nation's textile and garment sector.

To boost the sector and national development, the company has also co-operated with Binh Thuan Province to create zones for cultivating raw materials. (Viet Nam News)

Listed companies in good health: VAFI

Friday, May 2, 2008
A quick survey by the Viet Nam Association of Financial Investors (VAFI) showed that listed companies are operating well despite big difficulties. The association, therefore, has suggested informing investors soon about the good business performances of listed companies to calm them down.

According to Nguyen Hoang Hai, Secretary General of the Vietnam Association of Financial Investors (VAFI), the shocking monetary policy the State Bank of Vietnam has been following recently has had big influences on the stock market and businesses.

In this circumstance, speculators have spread rumours about the poor operations of businesses. The difficulties have been exaggerated to make it seem as though Vietnam was facing an economic crisis.

However, the recent survey by VAFI of some listed companies in the fields of banking, insurance, construction and real estate, transportation, rubber and pharmaceuticals showed that the companies are still maintaining the high growth rates recorded during the fourth quarter of 2007.

Construction companies are facing temporary difficulties. However, right from 2005, they all anticipated the difficulties they would face and price increases, and they all have had the plans to deal with the problems.

Hai said that in such a situation, securities investors may want to know about the ‘health’ of listed companies in the first quarter of 2008 sooner than usual. Therefore, according to him, listed companies should release their business results from the first quarter as soon as possible.

When asked if any mistakes could occur if listed companies announced business results early, Hai said that in order to avoid mistakes, listed companies could release figures equal to or lower than the actual figures. Moreover, listed companies should provide investors with reports which interpret how the inflation has affected their business performance.

Hai called the early announcement an effective measure to help recover the stock market.

Another measure Hai thinks listed companies should take is having their management boards buy more of their companies’ shares while limiting selling shares.

In fact, in the last time, some management boards of listed companies did try to buy shares of their companies, which helped calm investors down.

“The share purchase of management board members shows the responsibility of companies’ managers towards their shareholders,” Hai said. (Tien phong)

Making money produces more money

Friday, May 2, 2008
Only gold and real estate now can bring positive real interest rates to investors. However, securities deserve to be the investment channel for the long term.

Currently, only gold and real estate can bring positive real interest rates to investors, because the profit these investments can bring is higher than the inflation rate (the real profit for gold investment is 8.5% while real estate 0.7%).

Meanwhile, other investment channels are bringing negative profit. Deposits, for example, have the nominal interest rate of 3%; however, the actual interest rate would be minus if considering the high consumer price index (103%: 109.19% = 94.33%), which means depositors are suffering the actual loss of 5.67% (100% - 94.3% = 5.67%).

As for US dollars and securities, both the nominal and actual profits are negative.

The US$ price by the end of March 2008 had decreased by 1.88% over December 2007, which meant the nominal loss of 1.88%. However, as the consumer price increased by 9.19% during that time, the actual loss US$ investors suffered is even bigger, at 10.14% (98.12%: 109.19% = 89.86% or 100% - 89.86% = 10.14%).

How about investments in securities? The VN Index on March 31, 2008 was 516.85 points, and on December 28, 2007 (the last trading session of 2007) was 927.02 points. This means that the VN Index on March 31 was 55.75% of that on December 28, 2007, or the nominal loss of 44.25%. However, if counting the loss due to the higher consumer price, the actual loss would be higher, at 48.94% (55.75%: 109.19% = 51.06% or 100% - 51.06% = 48.94%).

Three scenarios of CPI

If the CPI increase in the last nine months of the year is equal to the average CPI increase in the last nine months of the last 16 years (3.52%), the CPI increase will be over 13% for the whole year of 2008.

If the CPI increase in the last nine months of the year is equal to the average CPI increase in the last nine months of the last three years, 2005, 2006 and 2007 (4.17%), the CPI increase will be over 13.7% for 2008.

If the CPI increase in the last nine months of the year is equal to the average CPI increase in the last nine months of the last four years 2004-2007 (5.46%), the CPI increase will be 15.2%.

The third scenario seems the most likely. Some experts have even forecast higher inflation rates.

Which investment channels, then?

Though deposits have been bringing negative interest, people will still choose this investment channels thanks to its safety. Making deposits to get positive nominal profit and negative actual profit proves to be a better choice than other investment channels, which have both the nominal and actual profit negative.

Gold deserves to be not only the ‘safe shelter’ in the context of high inflation, but an attractive investment channel. The gold price is forecast to see further increases, since domestic prices are close to the world’s price, which is believed will escalate as a result of the US cutting US$ interest rates to deal with its economic recession.

The US dollar, which was once the No 1 choice of many investors, has become less attractive in the eyes of investors as the dollar has been devaluating against other hard foreign currencies like the euro, pound and Japanese yen. It is wiser to invest in non-dollar currencies instead of relying on the US dollar.

Securities have attracted 300,000 investors with 288 listed companies and the total market capitalisation value of VND315tril. As the VN Index has been falling since the beginning of the year, securities investors have turned their backs on the bourse.

However, some analysts have forecast that the VN Index will rebound to hit the 600 point threshold by the end of this year, an increase of 15%. And if the forecast becomes true, securities investments will bring more profit than deposits.

The real estate market witnessed three fevers (the first one occurred in 1993-1994, the second in 2001-2002 and the third in late 2007, early 2008) before falling now. The tightened monetary policy and the overly high construction material prices both have made real estate prices increase and real estate demand decrease.

However, analysts believe that in the long term, real estate will still be the right investment channel to inject money in. The rapid urbanisation, the policies on allowing Viet Kieu and foreigners to buy homes in Vietnam will make real estate prices increase further. However, the profit from real estate investments will not be high due to the policies on limiting construction areas and tax policies (tentative progressive tax, which aims to limit speculation, and personal income tax). (TBKTSG)

Military Bank’s profits hit 15 million USD

Friday, May 2, 2008
The Military Commercial Joint Stock Bank’s profits for the first quarter of the year have reached 240 billion VND (15 million USD), 31.2% of its target for the year.
By the end of March, the bank’s deposits totalled more than 23.21 trillion VND (1.45 billion USD) while outstanding loans reached 13.1 trillion VND (813.44 million USD).

VAFI: listed firms should buy back more shares

Friday, May 2, 2008
Viet Nam Association of Financial Investors (VAFI) has called for more efforts from listed companies to buy back shares to help stabilise the stock market.

The association explained that buyback schemes implemented on a large scale should help calm down investors because buybacks show the responsibility company managers take for their stockholders.

The association also suggested that listed firms release business results in the first quarter of 2008 as soon as possible, to help quash rumours on the exchange.

“Almost all of the listed firms performed well in this quarter as we surveyed, despite the difficult times the economy is going through. The sooner the firms release their balance sheets, the better shares will get.”

VAFI also suggested that performance should consider the impact of inflation towards its business activities. (VNA)

Back to work: will the long holiday help rally investors?

Friday, May 2, 2008
The early week rebound of the VN-Index should spring investors into a rally next week after the long public holiday.

On Tuesday, a day before the holiday and the last session in April, the VN-Index rose slightly by 0.57% to 522.36.

Nearly 10 million shares changing hands brought in a turnover of VND415.79 billion (US$25.99 million).

Local investors demonstrated better investment behaviour on Monday and Tuesday, evident in the balanced volume of shares bought and sold.

According to the analysis department of Viet Nam International Securities, investors were active buyers because they wanted to preserve good stocks for new investments next month after the holiday.

"Meanwhile, others see the rally as a good chance to earn some money for the holidays. Then they continued selling shares," the department said.

Foreigners maintained their strong presence, buying a net 2.61 million shares on Tuesday. Foreign activity posted a revenue of VND149.59 billion ($9.35 million).

Consumer goods, pharmaceuticals and petroleum stocks were the most popular, while financial and property stocks seemed to be sliding.

"When the inflation rate is still high, sectors like petroleum or pharmaceuticals are important in daily life. Those shares are more likely to bring investors profit," said Dao Van Khanh, an analyst from Agribank Securities.

While banking or property stocks proved attractive for investors, Khanh noted, "it’s not a good time to trade those stocks daily. It’s better to have a long term and specific investment plan with those shares."

STB of Sacombank was the most traded code on Tuesday with 1.77 million shares.

As gold and oil prices on the world market signalled stability, local market regulators were working hard to stabilise the market as the VN-Index passed the 500-point mark.

"That good news could make investors optimistic in their trading next week. However, it’s hard to say how long the optimism will last," Khanh said.

In Ha Noi, the HASTC-Index on Tuesday slid 1.17% at 169.11. Trading turnover was VND112.59 billion ($7.04 million) for 3.25 million shares.

The foreign sector was also a net buyer in this market with 58,800 shares, posting a turnover of VND2.17 billion ($135,625). The market resumes trading on Monday. (VNS)

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)

Chairman denies losing company money in personal investments

Friday, May 2, 2008
The chairman of a southern sugarcane company has rejected allegations that he bankrupted the enterprise by investing company money in the stock market.
On Monday, shareholders of the La Nga Sugarcane and Sugar Company in Dong Nai Province sent a petition to several ministries and the Government Inspectorate accusing chairman Pham Nhu Hoa of misspending company funds.

The shareholders claimed Hoa had earmarked around VND17 billion (US$1.05 million) for personal stock investments without asking for approval from the board of directors.

The investment incurred heavy losses, according to the shareholders, who said that their April 22 meeting had to be postponed as there was no money to pay their dividends.

The fuming stakeholders have repeatedly demanded that the dividends be paid back.

Speaking with Thanh Nien Wednesday, Hoa said he had invested in the stock market in a bid to bail the company out of financial difficulties.

The beleaguered chairman said he had invested under the La Nga company name, not under his own.

He showed correspondents two contracts acknowledging that La Nga Company had bought shares in Rubber Securities Company and the Sacombank Securities Company.

Though Hoa admitted he had failed to obtain approval from the board of directors, he insisted he had acted in the interests of the company, not his own.

Hoa told Thanh Nien that five out of the board’s six members had backed his investment at a directors’ meeting on April 18, though he did not seek official approval.

He said he would elaborate more on the investment decision and apologize to the shareholders at another board meeting on Saturday.

The firm’s next shareholder meeting is scheduled for mid-May, according to Hoa. (Thanh Nien)

xpert says Viet Nam stock market woes linked to inflation fight

Viet Nam’s complicated battle against inflation has weakened its stock market, John Shrimpton, a director of Dragon Capital, a HCMC-based investment fund, said in a Bloomberg Television interview Tuesday.
How’s the Vietnamese stock market looking?
John Shrimpton: It’s still pretty weak and it’s likely to remain so as long as the government continues to target inflation as its key issue.

Is it not getting any support from the renewed confidence in the US markets – isn’t that doing any good to the confidence among investors?

Not really, first of all I think we can say that the performance of the Vietnamese market is somewhat non-correlated with what’s going on in the outside world and especially the US market.

Viet Nam is very much moving under its own factors.

The key one is the government, quite simply, is in a bit of a bind.

We’ve got inflation at a level of 21% year-on-year and it’s very much constrained in terms of its ability to tackle inflation which of course is being driven by things like food prices as we see elsewhere, [and] by the need also to pay attention to maintaining high growth in order that the job creation rate required by the demographics of this country is maintained.

So the net result is it really is between a rock and a hard place at the moment.

So what is the risk of a return to hyperinflation as seen back in the late 80s?

- I think that’s not a likely scenario.

The economy of course is in a much more sophisticated situation these days; it’s a much more complex picture for the government to tackle and so the remedies that were indeed rolled out successfully back at the end of the 80s and beginning of the 90s to take inflation down from levels of more than 400 percent down to 1 or 2 percent per annum as we saw into the mid-nineties [may not work].

It’s going to require a more sophisticated approach these days because of the level, for example, of integration into the global economy, courtesy not least of Viet Nam joining the World Trade Organization (WTO) last year.

The result of that is that the asset markets including the stock markets are collateral victims of the government squeezing liquidity and seeing interest rates heading up.

Well, what do you mean when you’re recommending a sophisticated approach to the problem over inflation, the government has already raised rates this year and raised the reserve requirement ratios selling more bills and bonds…

That’s correct, but the big issue in Viet Nam, as indeed elsewhere, is that the key driver for inflation is food prices and Viet Nam is a net food exporter and the second largest rice exporter.

So, in many respects, it’s a beneficiary of the higher commodity prices we see prevailing particularly in terms of soft commodities that we see at the moment.

But the key issue is one that you can’t wage an all-out campaign on a single issue such as inflation without having regard for the effects of what goes on with its currency and, in turn, its attractiveness as a foreign direct investment destination because the big challenge that underlies everything the government does here is the demographics mean that one and a half million people come into the job market every single year.

That means there’s always underlying pressure to create jobs and, with a shrinking state sector these days, that means creating more reforms, better conditions for foreign investment and also for private sector investment in the country - so it’s not really just a question of targeting a single issue here.

It requires a much more symphonic approach than has been encountered before. (Bloomberg)

Greenbacks get the love

Friday, May 2, 2008
Local companies are rushing to borrow dollars from commercial banks before the State Bank’s regulation to tighten dollar lending takes effect.
According to an official from Bank for Investment and Development of Viet Nam (BIDV)’s treasury department, demand for dollar credit has gone up sharply since the State Bank released Decision 09/2008/QD-NHNN on April 10. The decision came into effect on April 25, 2008.
“Borrowing in dollars is much cheaper than in dong. Companies are borrowing from banks even without a real need for foreign currency before it becomes more difficult to do so,” said the BIDV official.

The lending rate in Viet Nam dong varies from around 18-20% while dollar rates are around 9-10%.

A source from Bank for Foreign Trade of Viet Nam (Vietcombank) said that due to strong demand for dollar borrowing recently, the bank had to borrow dollars from other banks via the interbank market.

Nguyen Thanh Toai, Asia Commercial Joint Stock Bank’s deputy general manager, estimated that over the last two weeks, the demand for dollars increased by close to 30%. According to a State Bank official, companies borrowing without need has been one factor which has forced authorities to tighten the regulation.

With Decision 09/2008/QD-NHNN, customers are now permitted to borrow dollars from commercial banks for three purposes instead of the previous eight: for importing goods and services, settling pre-mature foreign debt and investing overseas.

State Bank statistics show that since December 2007, credit growth in dollars has surpassed credit growth in dong. Over the first three months of 2008, credit growth in dollars hit almost 13%. The State Bank hopes that by tightening dollar lending, the economy’s dollarisation will be easier to control.

The International Monetary Fund rates an economy with foreign currency deposits in excess of 30% as a dollarisation economy. Viet Nam’s ratio, after peaking at 41.2% in 1991due to hyper inflation, has been fluctuating between 20-30%.

In a dollarisation economy, controlling credit growth is more difficult. The central bank’s measures such as raising reserve requirements and issuing central bank notes to withdraw money from circulation are only effective in controlling local currency credit. (Dau Tu)

Nearly 100% of banks raise interest rates

Friday, May 2, 2008
On April 29, at the same time the Viet Nam Banking Association released an announcement on adjusting the negotiated ceiling interest rate among its members, many banks applied new interest rates.
By the end of April 29, most of the banks belonging to the 38 members of the Viet Nam Banking Association announced they would raise interest rates to the ceiling level, bringing the interest rate on VND deposits to 11.5%/year for deposits of less than 6 months and 12% for deposits of over 6 months.
12% is the ceiling level defined by the State Bank of Viet Nam in late February 2008.
Oriental Commercial Bank (OCB), Viet A Bank (VAB), Saigon-Hanoi Bank (SHB), Southeast Asia Bank (SeABank), Techcombank, VPBank, Sacombank applied the above interest rates.

Notably, state-owned commercial banks quickly joined the game. Vietinbank announced it will increase the interest rates on 7- and 9-month bills to 12% a year as of May 1, 2008.

The Bank for Investment and Development of Viet Nam (BIDV) also stated it will apply the maximum interest rate of 12%/year as of April 29.

According to the Vietnam Banking Association, the adjustment of interest rates aims to ensure positive real interest rates under the government’s instruction. (TBKTVN)

Collateral shares to banks cast shadow over market

Friday, May 2, 2008
The diminishing value of shares accepted by commercial banks as collateral for loans has put pressure on many banks to protect the value of their security interests by selling off the shares before market values fall further.
The upshot: if banks act on the rational impulse to cut their losses, they will dump huge numbers of shares on an already depressed stock market. The prospect has given many in the securities industry, as well as State regulators, a bad case of the heebie-jeebies.
Before the State Bank cracked down on the practice about a year ago, commercial banks accepted an enormous quantity of stock as collateral in loans to stock market investors. Many of the borrowers have since lost money on their stock investments and banks fear that the loans may fall into default.

Each day that the banks delay selling the shares to pay off the debts, the collateral is losing value.
The clock is ticking
During the hot growth of the stock market in 2006-07, investors were easily profiting from securities investments. Investors were readily able to mortgage their appreciating shares and reinvest in even more.

Then the State Bank, sensing the risk of a bubble bursting and leaving commercial banks in a crisis, cracked down on the process.

Late last year, the stock market plunged, and the shares held as collateral by commercial banks lost an enormous proportion of their value.

Earlier this year, commercial banks began dumping shares, and the VN-Index fell to the 500-mark.

With the stock market now restricted to a daily trading band of 2%, there’s little room for shares to regain their lost growth, and commercial banks are now chomping at the bit to sell more shares and realise the value of their collateral. But, for the moment, the State Bank has cried, whoa, Nelly.

"Even though the State Bank has ordered State-owned commercial banks not to sell collateral shares, and has strongly encouraged private joint-stock banks not to, as well, the existence of these shares is a burden on the market," said independent market analyst Nguyen Tien Dung.

"Sooner or later, the banks will sell these shares on the exchange despite the warning from the State Bank," Dung said, warning that the volume of shares held by commercial banks was too much for the market to absorb at a time when the market was already oversupplied.

John Nolan, an analyst for a HCM City fund management board, said, "In different markets worldwide, market regulators have a dedicated fund to solve market problems. Why doesn’t your country have a similar fund?"

According to Nolan, the State Bank could spend a certain amount of money from such a risk management fund to buy back collateral shares. The shares could then be held for a certain period.

When the market warmed up again, commercial banks could then buy back the shares from the State Bank and re-sell them at a profit.

In the meantime, commercial banks were following the State Bank directive and holding onto the shares, said Le Xuan Nghia, head of the State Bank’s Banking Strategy Department.

"The banks themselves have begun to understand that selling more shares at a time when the market is already facing oversupply doesn’t benefit themselves. That’s why they’ve delayed selling shares," said Nghia.

"I’ve also heard that the Government may direct the State Bank to implement a discount loan to commercial banks at 9% a year, which would be enough to get them to delay selling the shares for a while," he added.

Mortgaged out

A large number of collateral shares are also lurking in the vaults of securities companies that have offered mortgage services to their clients.

Dung noted that these also posed a danger to an oversupplied market as securities companies were under no regulation requiring them to delay foreclosing on shares and selling them.

"It’s understandable that firms or banks need money at this moment, and may be forced to sell shares because investors have not paid off their debts," said Dung.

However, Dung noted, this action could be delayed for a time with a guarantee from market regulators to ensure the viability of securities companies during this difficult period.

"The listed companies’ association has urged securities companies to delay selling mortgaged shares. But at the core is how much securities companies will be aware of their actions in the near future," said Nguyen Son, head of the market development department of the State Securities Commission.

"The more they are aware, the more we are assured of a solution." (Viet Nam News)

Ceiling interest rate removed, deposit interest rates may rise

Friday, May 2, 2008
Experts believe that once the ceiling interest rate scheme is removed, a new interest rate race will kick off, which may see deposit interest rates rise to 15% per annum, higher than the highest peak seen in the February race.
While the State Bank of Viet Nam was still working with the Saigon Commercial Bank (SCB) on SCB’s promissory note issuance, which was denounced as violating the banks’ agreement on the ceiling interest rate of 11%, the Prime Minister decided that the ceiling interest rate scheme must be removed.
The 2-day working session between the State Bank of Viet Nam and SCB ended earlier this week, while the minutes of the meeting did not say if SCB’s move to issue promissory notes with the interest rate higher than the ceiling interest rate was wrong or right.

SCB, which was first accused of violating banks’ agreement on ceiling interest rate, has automatically become the pioneer in removing the ceiling interest rate scheme with the Prime Minister’s decision.

Immediately, bankers have expressed their concurrence with the Prime Minister’s decision.

“The decision shows that the government is trying to regulate the national economy based on economic rules, not on administrative orders,” said Luu Duc Khanh, General Director of An Binh Bank.

Khanh said that the decision will help commercial banks mobilise capital more easily and settle difficulties caused by the tightened monetary policies.

“In principle, the best solution to fight inflation is to withdraw money from circulation, and the best tool to do that is the interest rate policy. The decision on removing the ceiling interest rate proves to come in line with economic laws. The other thing the government needs to do now is to calculate and forecast the inflation rate, so that people will make deposits at banks,” said Dang Quoc Tien, Deputy General Director of Military Commercial Joint Stock Bank.

Bankers say that the removal of the ceiling interest rate scheme will pave the way for commercial interest rates to go up further, possibly to 15% per annum.

Worries have been raised that the higher deposit interest rates will bring about lending interest rate increases, which will still put heavy burdens on businesses. However, Pham Anh Dung, General Director of SCB, said that it is more important to have capital for lending than the interest rate for lending.

Dung said that if banks continue offering low interest rates, people will not make deposits at banks anymore, but will make investments in other channels, buying gold, for example. As a result, compulsory reserves will decrease, which proves to be bad for the central bank’s management of the monetary market.

Analysts have pointed out that the ceiling interest rate scheme proves to be in contrast to the government’s policy on curbing inflation. As interest rates were lowered, depositors could not enjoy real profit on their deposits and decided to withdraw money from banks to buy gold. The director of a HCM City-based bank said that during five days, March 2-7, VND600bil was withdrawn from his bank, a surprisingly high figure.

High inflation and tightened monetary policies have been putting big difficulties on commercial banks. Most of the banks had very satisfactory business results in 2007 (big capital, large operation scale, low bad debt ratios), while they all faced low liquidity in early 2008. (VNN)