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)

Vinaconex-9 targets 380b dong revenue in 2008

Friday, May 16, 2008
Construction Joint Stock Co No 9 under the Viet Nam Construction Export Import Joint Stock Corp (Vinaconex) yesterday May 14 organised the third annual shareholders' meeting and passed the year 2007's business result and business plan for this year.
Particularly, this year the company targets to reach 470.7 billion dong in total business and production value, up 23% on 2007, 380 billion dong in total revenue, rising 35% yoy, 16.1 billion dong from pre tax profit, increasing 79% against 2007 and dividend of 14%.
Vinaconex-9 operates in carrying out industrial and civil works and transportation.
The company has been carrying out hundreds of construction projects nationwide like silo system and the chimneys of cement plants of Hoang Thach, But Son, Bim Son and Nghi Son.

Eximbank launches new savings product

Friday, May 16, 2008
Viet Nam Export Import Commercial Joint - Stock Bank (Eximbank) on May 14 officially launched a new product called he 24h overnight savings throughout the network in order to diversify capital mobilisation method as well as customers' interests.
The product is the short-term investment of individual customers through savings with high transparency, helping customers manage capital flow effectively.
The saving rate will be paid everyday, which will be recorded in principals based on Eximbank's interest rate applied on 24h overnight saving product.
The bank's demand deposit rate is 0.3% a month and weekly interest rate is 0.958% a month.

Joint stock banks want right to sell shares to foreign investors without SBV permission

Friday, May 16, 2008
Viet Nam Association of Financial Investors (VAFI) recently proposed State Bank of Vietnam to allow commercial joint stock banks to take the initiative in selling shares to foreign investors with the price of no more than 5% of chartered capital without prior SBV permission.
Right after the share transaction finishes, joint stock banks must report to SBV.
According to Vafi, foreign investors used the whole allowable holding in listed banks. Meanwhile, the investors cannot buy unlisted bank shares due to complex procedures.

Maintaining banking liquidity may not be inflationary

Friday, May 16, 2008
Liquidity shortages are becoming more severe in Viet Nam's banking system, as citizens withdrew funds in increasing amounts to seek higher returns. This situation gives control of the economy to the informal lending sector and removes a major macro policy tool from the State Bank of Viet Nam (SBV). As a result, the government is under mounting pressure to ease the policy of capping deposit rate. Removing such caps may not have significant marginal effects on inflation, since lending continued outside the banking system.

The measure to curb credit growth by capping deposit rates has been a failure in two main fronts. First, sources and uses of funds were able to find each other outside of the banking system, so credit growth continued to power demand and inflation. Because more lending is done outside of measurable avenues, policymakers lose the precious little visibility that they have. Without banks to intermediate, lending becomes inefficient, as most lenders and borrowers have limited scope to find counter parties arid to measure risk. As a result, curbside funding can cost up to 50% a year, which implies that market pricing for capital can serve to tighten credit growth as well.

Secondly, and more importantly, informal lenders and squeezed small banks could exacerbate a banking crisis if economic conditions worsen. Banks now face mounting withdrawals by depositors, especially the smaller and thinly capitalised banks. This further forces borrower to seek other sources of funding, adding pressure on the informal market, which likely would not be accountable to depositors, as they probably receive less backing from the government. Should economic conditions deteriorate as feared, informal financial institutions and the smaller banks could more easily default and cause a run not only on themselves, but also on healthier institutions.

Allowing banks to compete with deposit rates would unlikely add inflationary pressure on the margin, since lending was still being done. Capped at 12%, current deposit rates are so deeply negative after accounting for the 21% inflation. Under these conditions, many individuals can probably tolerate risks that would normally be unacceptable. But a positive real deposit rate is not completely unthinkable, given the enormous gap between the official deposit rate and the informal lending rate. Additional funds at the banks would partly serve to meet reserve requirements that are becoming increasingly difficult, especially for small banks. The rest would be a substitute for current informal lending, leaving little room for net credit expansion.

Firms would also benefit from a lower rate and more reliable lender. Under the capped system, firms accepted curbside usury because liquidity issues are threatening solvency. With mounting profitability problems, firms would be well served to find alternative funding sources. The government's 7.2% growth target would significantly depend on business continuity, and inflation may be a lesser evil in front of a banking crisis.

This information is given by Citigroup. (SGT)

Review on prices of Vietnamese fund certificates

Friday, May 16, 2008
The Ho Chi Minh City Stock Exchange (HOSE) now has three listed fund certificates including MAFBF1 of Manulife Vietnam Fund Management Co, PRUBF1 of Prudential Balanced Investment Fund and VFMVF1 of Vietnamese Securities Investment Fund. Unlike previous assessments on growth potentials and investment opportunities of Vietnam funds, all of three fund certificates are facing seriously difficult period.

Recent slumps of fund certificates showed that insurance firms were unlucky with their own investment portfolio on the stock market.

Two codes of MAFBF1 and PRUBF1 welcomed the 2008 new year with the trading price equalling to the face value only. During the first session of 2008, PRUBF1 closed at 10,500 dong each that plunged to 9,600 dong on January 15.

MAFBF1 went public in the end of 2007 and recorded the price of 9,800 dong per unit in first sessions of February 2008.

Starting the year with the price of 27,400 dong per unit, VFMVF1 showed its strength clearly as compared with new fund certificates. However, VFMVF1 also was around the threshold of 30,000 dong each that was closed at below 20,000 dong on February 29 and then lower 15,000 dong in the following month. With a fall of 200 dong a day during the last 10 sessions, VFMVF1 is hard to return the level of over face value in June 2008.

In theory, investments into the stock market through professional operations of securities investment funds are effective option for small individual investors because funds are experienced in financial investments with effective information solution and risk control. It is now questioned why prices of fund certificates slide deeper recently.

In March, VF1 reported the net asset value (NAV) of over 2.58 trillion dong with total 100 million fund units while MAFBF1 also recorded the NAV of 9,355 dong/unit on April 10, 2008. (DDDN)

Traphaco to list shares on HOSE

Friday, May 16, 2008
The Ho Chi Minh City Stock Exchange (HOSE) yesterday May 14 approved in principle Traphaco Joint Stock Co to list eight million ordinary shares at 10,000 dong par on the southern bourse under the consultancy of Kim Long Securities Joint Stock Co.

Traphaco with a chartered capital of 80 billion dong specialises in pharmaceutical and chemical business and production, medical equipments and materials, foods trade, alcohol, brewery, cosmetic, and export import activities.

Traphaco has three strategic shareholders namely Mekong Capital, Australia & New Zealand Bank (ANZ Vietnam) and Bidv-VietnamParners Investment Fund Management Joint Venture Co (Bvim). Of which, Mekong Capital holds 5% or 400,000 shares, ANZ 3.13% or 250,000 shares and Bvim 2.5% or 200,000 shares.

Last year, the company made a revenue of 532 billion dong, 37 billion dong from after tax profit and dividend of 12% that could be 587 billion dong, 45.4 billion dong and dividend of 24% this year respectively.

Kim Long securities broker reports 2.64b dong Q1 profit

Friday, May 16, 2008
Kim Long Securities Joint Stock Co (coded KLS) recently announced the business result in the first quarter of this year with 84.35 billion dong in revenue from stock business and investment, equalling to 24.45% of the year's plan and 2.646 billion dong from after tax profit or 1.06% of the year's target.
This year, the company targets 345 billion dong in total revenue and 250 billion dong from after tax profit.
Ending the trading session on May 14, KLS-coded shares were traded at 17,200 dong per share, losing 500 dong or 2.82% against the previous session with 2,500 shares being traded.

Hapaco to buy back 1m fund shares

Friday, May 16, 2008
The Ho Chi Minh City Stock Exchange (HOSE)-listed Hai Phong Paper Joint Stock Co (Hapaco-coded HAP) recently registered to buy back one million HAP-coded shares to make fund shares from May 19 to August 20 according the mode of matching orders and negotiation.
The capital to buy back these shares is from the company's profit and capital surplus.
Reportedly, on May 9, STC-listed Sao Ta Seafood Joint Stock Co (coded FMC) also announced to buy back 300,000 FMC-coded shares to make fund shares within three months from May 16 to August 16.

Song Da 4 subsidiary to go public

Friday, May 16, 2008
The Hanoi Securities Trading Center (HaSTC) on May 13 announced that it approved the Song Da Joint Stock Co No 4 (coded SD4) to list 7.5 million shares worth 75 billion dong on the northern bourse.
Gia Lai province's Pleiku City-headquartered SD4 with a chartered capital of 75 billion dong, of which the state holds 64% and the remaining 36% belonging to the company's shareholders, specialises in irrigation works, hydropower construction, transportation, civil construction and 110 KV transformer stations.

Sa Giang export import firm to pay dividend in shares

Friday, May 16, 2008
Ho Chi Minh City Stock Exchange (HOSE) on May 13 announced that the registration deadline for Sa Giang Export Import Joint Stock Co (coded SGC) to offer shares to pay dividend for the second phase of 2007 is on May 28 and the ex-interest date on May 26.
Under it, SGC plans to offer 572,418 shares at 10,000 dong par to pay dividend of 14%.
The transaction date is scheduled on July 18.

Habubank Chooses World-Check to Enhance its Compliance Processes

Thursday, May 15, 2008
Habubank, the first commercial joint stock bank in Viet Nam, today announced that it will utilise World-Check's risk intelligence solutions to enhance its due diligence and Know Your Customer (KYC) compliance processes. World-Check is the leading global provider of intelligence on heightened risk individuals and entities, with more than 2800 clients in 153 countries.

"Habubank is committed to promoting the highest standards of ethical and responsible business and therefore we have chosen World-Check to help address our regulatory and business requirements," said Mr. Nguyen Tuan Minh, Executive Director, Deputy Chief Executive Officer & General Counsel of Habubank. "World-Check's 97% year-on-year client renewal rate bears testimony to the confidence that other institutions have placed in this market-leading service. With World-Check's comprehensive coverage, we can be confident we are effectively mitigating risk across our various banking areas in order to ensure compliance, prevent illegal activity and protect our customers and our reputation."

"World-Check provides instant access to relevant KYC and Political Exposed Persons (PEPs) information to institutions worldwide, including 47 of the world's 50 largest financial institutions," said David Leppan, World-Check founder and CEO. "We are delighted that Habubank has chosen World-Check as part of their banking policy to align in-house compliance efforts with that of other leading and international financial institutions."

About World-Check:

World-Check provides its global database of heightened-risk individuals and businesses to more than 2800 institutions, including 47 of the world's 50 largest financial institutions and hundreds of government agencies. The database is updated daily in real-time by World-Check's international research team, and is derived from hundreds of thousands of public sources. Coverage includes Politically Exposed Persons ("PEPs"), money launderers, fraudsters, terrorists and sanctioned entities -- plus individuals and businesses from over a dozen other high-risk categories. World- Check's database and tools find direct application in financial compliance, anti-money laundering ("AML"), Know-Your-Customer ("KYC"), PEP screening, enhanced due diligence ("EDD"), fraud prevention, government intelligence and other identity authentication, background screening and risk-prevention practices.

World-Check offers a downloadable database for the automated screening of an entire customer base, as well as a simple online service for quick customer screening.

About Habubank:

Established in 1989, with the initial purpose to provide loans and services in housing and building development field, Hanoi Building Commercial Joint Stock Bank ("Habubank"), headquartered in Hanoi, Viet Nam, is one of the very few first commercial joint stock banks in Viet Nam. In 1995, Habubank expanded into providing commercial banking services to businesses, SMEs, individuals and other financial institutions. Habubank is now one of the leading banking institutions in Vietnam and strategically positioning itself to meet the demands of future growth, aligned with economic development in Viet Nam.

Phu My Fertiliser pays out 10% dividend for 2007

Thursday, May 15, 2008
Phu My Nitrogenous fertilizer Joint Stock Co (PVFCo) has announced a dividend payment of 10%, or VND1,000 per share, for 2007.
Payment will begin next week. Under its plan, the company’s revenue growth and profit will be 30% above last year. This year, revenue is expected to reach VND4.4 trillion and pre-tax profits VND1.19 trillion.

Foreigners Net Buyers Of VND27 Billion Of Shares

Thursday, May 15, 2008
Foreign investors were net buyers of VND27 billion ($1.7 million) of Vietnamese stocks Thursday, out of a total of VND57.2 billion traded, the Ho Chi Minh Securities Trading Center said.
olume traded totaled 1.37 million shares, with foreigners accounting for 44.8% of the total, according to the stock market operator. (Dow Jones)

Some traders call for stock market ‘time-out’

Thursday, May 15, 2008
With the VN-Index now dipping below 500, and seemingly no end in sight for its long downward plunge, some investors are calling for a temporary suspension in trading or some other form of official intervention to stop the haemorrhaging.

"I think the regulators should pause trading on the stock exchange for several days because what is happening is making the general situation worse," said veteran Ha Noi investor Hoang Tuan.

Ngoc Cuong, an investor with Habubank Securities Co, said, "I’d rather see that than watch the VN-Index keep falling day by day."

A delay in trading could help investors cool off and give them a chance to reconsider their investment portfolios, Tuan added.

In fact, investors had a brief time-out during the public holidays in late April and early May, when the market went dark for several days.

But, when traders returned from the holiday, the VN-Index continued falling.

"The delay should be a half a month, not only a couple of days," countered Tuan. "The time must be calculated to give enough time for a calming down period."

Get on with it

Other investors took a different tack, suggesting that measures such as a trading suspension or tightening the daily trading band simply delayed the inevitable.

"Sooner or later, the VN-Index will be back to 300 points," said one investor at the offices of Habubank Securities Co. "Tightening the trading band only stretches out the time over which the market falls."

However loosening the trading band on the HCM City Stock Exchange back to the previous plus-or-minus 5 per cent per day spooks many individual investors who have seen the greatest suffering during the free-fall of the VN-Index.

Nguyen Tien Dung, an independent analyst, said, "Domestic investors now have nothing to do with the stock market. Instead, they keep mentally putting themselves in the positions of regulators."

The VN-Index was falling heavily partly due to the investors themselves, he said. They have acted in panic, causing an even greater imbalance between the share volumes and capital inflows.

"And when the market falls too much, they wait for regulators to do something, rather than taking greater care of what they are doing," Dung said.

"Instead of calling for more help from regulators, they should calm themselves down.

"Then, they might escape from the mud."

Active buying

VN-Index yesterday continued its downward trend, slumping another 1.74 per cent or 8.42 per cent to close at 475.5.

Active buying by foreign investors gave a small lift to total trading volume, which reached 1.9 million shares. Value of the day’s trades totalled VND82.62 billion (US$5.16 million).

Petroleum Mechanicals (PMS) was the day’s only gainer, with nearly all other codes hitting their floor prices.

Among some leading blue chips, Hau Giang Pharmaceuticals (DHG) fell 1.81 per cent to VND168,000, and Kinh Do slid 1.85 per cent to end the day at VND108,000.

Kim Anh, a broker with the Golden Lotus Securities Co, said domestic investors have become too panicked to realise what they are doing and were now feeding the steady fall of the VN-Index.

Only foreign investors have retained any enthusiasm to buy shares. Yesterday, they were active buyers of a net of 676,410 shares, representing a value of VND35.33 billion (US$2.21 million).

Nguyen Huy Duong, an analyst of Hoa Binh Securities, said that foreigners have gone through hard period on other stock markets and understood the patterns on the Vietnamese bourse.

"Foreigners continue to realise that Viet Nam is a really attractive destination for their investment despite the economic difficulties," said Duong.

On the northern market, the HASTC-Index closed off 2.04 per cent to 144.85. Gainers included penny stocks like Luong Tai Construction (LUT) or Yen Bai Agri-forest&Food (CAP).

Duong noted that, on the Ha Noi market, the trading band was a percentage point wider than in HCM City, allowing day traders to earn a little more than they could on the southern market.

However, trading volume in Ha Noi continued modest, at only 272,300 shares, with a value of VND10.35 billion ($646,875), concentrated mostly in penny stocks. (VNS)

Raising interest rates, foreign banks denounced of breaking law

Thursday, May 15, 2008
Though seriously lacking capital, no domestic bank dares raise deposit interest rates. Therefore, they have been envious of their foreign colleagues, which have unflinchingly raised deposit interest rates to over 12%, the ceiling interest rate.

Foreign, domestic banks go fishing – for capital

Are the foreign banks violating the law?

The general director of a foreign bank branch in Viet Nam affirmed that his bank is mobilising capital at interest rates not higher than 12% per annum. However, he said that the decision by the State Bank of Vietnam (decision 02) dated February 26, 2008 on setting the ceiling interest rate of 12% was not valid any longer since the Prime Minister instructed the abolition of the ceiling interest rate scheme.

Domestic banks still apply the ceiling interest rate of 12% because they have to follow the association’s agreement on ceiling interest rate. Meanwhile, he said, the agreement is not valid for the banks which are not association members.

When a reporter of Dau tu chung khoan contacted the bank’s staff as a client, the staff said that the bank can offer 13.97% on 1-month deposits of VND200mil and more.

Commenting about the explanation by the general director, the leader of a state owned bank said that Decision 02 is applied for all banks operational in the territory of Viet Nam, including foreign bank branches. Though the Prime Minister has instructed the ceiling interest rate scheme to be abolished, the State Bank has not released any document on abrogating the regulations stipulated in Decision 02. Therefore, Decision 02 is still valid.

There are different ways of understanding the spirit of Decision 02. An official of the State Bank of Viet Nam said that Decision 02 applies to domestic banks only. Therefore, in principle, no one can say that foreign bank branches are violating the law.

Ceiling interest rate scheme needs to be removed

The well-informed circle said that after the Prime Minister instructed the removal of the ceiling interest rate scheme, the Government had a meeting with the State Bank of Viet Nam and the National Advisory Council for Monetary Policies. After the discussion, the Prime Minister preserved his opinion on removing the scheme.

Also according to the leader of the state owned bank, some clients had withdrawn several hundred billion VND from his bank in the last few days, and it is possibly because the clients want to draw out money to make deposits at foreign banks.

“Currently, all banks are trying to dodge the laws to offer interest rates higher than the ceiling rate in order to lure more capital to their banks. There is no need to maintain the ceiling interest rate scheme anymore, as it is exists on paper only,” he said.

A reliable source at the State Bank of Viet Nam said that the 12% ceiling interest rate proves to be unsuitable now, and it is considering removing the scheme.

“The State Bank is discussing measures to stabilise the market if it removes the ceiling interest rate,” the official said. (DTCK)

Market falls can’t dash HSBC’s hopes

Thursday, May 15, 2008
The Hong Kong and Shanghai Banking Corporation (HSBC) remains optimistic about Viet Nam’s economy and stock market in its latest report.

Reports and forecasts good for…?

HSBC’s reports about Viet Nam, including the latest one, show that its experts consider Viet Nam an attractive market in the long term, and recommend purchasing shares.

In the controversial April 7 report by HSBC on investment strategies in the Asian market in Q2, HSBC wrote that Vietnam, together with Japan, the Philippines and Australia, were ‘markets better avoided’ due to macroeconomic uncertainties. The report lowered the forecast VN Index to 600 points by the end of this year instead of 1,000 points as it previously forecast.

However, in general, HSBC has not changed its perspective on Vietnam’s market. It believes Viet Nam a market with long-term potential and one that will see cheap stocks.

The optimism about Viet Nam’s market once again could be seen in the latest report. Moreover, HSBC said that the stock prices had hit the bottom at the 500 point threshold.

Released on May 8, HSBC’s report said that the stock market has stopped sliding since the Government took drastic measures to rescue the market in March.

However, the stock market found other ‘new bottoms’ after HSBC made the conclusion with the VN Index falling to 475.5 points on May 14.

The VN Index increased slightly in April by 1%, much lower than the 8% increase of MSCI of Asia-Pacific, not including Japan, and the 14% increase of H stocks on China’s market. The everyday trading volume was also modest, at $21mil, just less than 1/3 of that at the end of 2007.

Foreign investors continue buying Viet Nam’s shares, $122mil worth in April and $59mil worth in March.

HSBC thinks that risks still exist in the short term as macroeconomic problems still cannot be settled. The inflation rate of 21% over the same period of last year, increased trade deficit and the fact that the Government has lowered the economic growth rate, all worry investors.

According to HSBC, one of the key factors that will influence the market is the profit of listed companies. The EPS is expected to reach 20% this year and next year, the P/E of listed stocks in 12 months will be 11.8, which shows cheap stocks in a market with potential.

However, the report has reminded investors that Dragon Capital has forecast a much lower EPS for this year and the next year, 3% and 7%, respectively.

In fact, the profit gained by listed companies was very satisfactory in Q1. Most of the 15 companies with the biggest market capitalisation value saw high profit, except securities companies. HPG, for example, had an EPS as high as 451%, while power shares, especially DPM, had the EPS of 77%, VSH 72%. Meanwhile, the Saigon Securities Incorporated (SSI) saw a minus EPS (-75%).

HSBC, once again, advised foreign investors to purchase Vietnamese stocks for long-term investments, saying that the current difficulties are just temporary.

The listed companies that focus on their main business fields and do not jump into other fields, including Vinpearl and Vinamilk, have emerged as attractive stocks, according to HSBC.

In this report, HSBC did not make a forecast about the VN Index. (TBKTVN

Seeking opportunities even when markets slide down

Thursday, May 15, 2008
The falling stock market has been disappointing investors. However, experts said that opportunities appear even when the market falls; however, investors have to look for them.

Dinh The Anh, Head of the Analysis and Investment Division under the Saigon Securities Incorporated SSI

The stock market fell by 48% from January 2, 2008 to may 13, 2008. On average, the P/E of the share items on HCM City Stock Exchange is hovering around 12x, while its peak was 30x in March, when the market was hottest.

There are two groups of investors, the ones who have low capital cost and have high expectation on the market, and the ones who have high capital cost, especially domestic individual investors. As for the investors of the former group, it is now the right time for them to seek their opportunities. Meanwhile, I cannot say that the investors of the latter group are seeking business opportunities at this moment.

Investors should understand that when the prices of many commodities, including construction materials, farm produce, are increasing, many listed companies would recieve benefits from the price increases.

For example, we think that natural rubber companies are deserved to be interested in as analysts have forecast about the rubber shortage, while the price has increased by 10-30% so far this year.

Dr Hoang Xuan Quyen, Investment Analysis Director under Tan Viet Securities Company

With the VN Index at 475.5 points yesterday and HASTC Index 144,85 points, the average P/E has reduced to 11-12 in both Hanoi and HCM City.

This P/E is low enough to bring investors the profit equal to bank interest rate if investors keep shares to get dividends. That explains why many investors think that it is now the right time to buy shares, especially foreign investors, who have been keeping purchasing shares with the purchase volume bigger than sale volume.

However, small investors dare not take this opportunity to buy shares at this moment. It is partially because their capital is exhausted, and the share liquidity has become weaker in the last two months.

Only brave investors, who have long term capital and accept to hold shares until the end of 2008 at least, dare purchase shares now.

Brave investors that accept high risks to get high profit, would choose cheap share items of banks, seafood, real estate and woodwork companies, while cautious investors would choose the shares of pharmacy, healthcare, transport, trade service companies, which are not greatly influenced by the market fluctuations.

Dr Nguyen Duc Thanh, Lecturer at the Economics University

Opportunities will come only to the investors who really have vision and capital. It seems that not many investors have all these conditions.

Domestic investors are frightened when their accounts become scanty and they try to sell shares out. No one is brave enough to buy shares at this moment to balance share prices. Only foreign investors are trying to take advantage of the opportunity.

Ngo Minh Duc, Analyst of EuroCapital Securities Company

I think that there are not as many opportunities for individual investors as there latent risks.

First, the stock market has been falling continously, and investors are trying to sell shares.

Second, the VN Index has dropped by 60%. A lot of banks and institutions have to sell mortgaged shares, leading to share supply increases.

Third, the financial reports of listed companies are not attractive.

Fourth, the market liquidity has nearly been lost.

Fifth, the national economy is encountering many difficulties. The CPI increased by 11.06% in April.

Sixth, companies all try to increase chartered capital by issuing more shares, which has led to the share dilution. (TBKTVN)

World Bank: Viet Nam Stock Market Needs Institutional Investors, Investment Caps

Thursday, May 15, 2008
Noritaka Akamatsu, the World Bank’s securities analyst in Viet Nam said the local stock market needs to attract professional institutional investors and caps on investment portfolios to help recover the slumping market because investors cannot buy all the securities in the market.

“The stock market is suffering a systematic but minor problem: banks lent securities investment and also let their affiliates carry out financial investment. If problems arise, these banks must protect their mortgaged valuable securities by trying to recover their loans for securities trading, which forced the mortgaged securities investors to sell off their shares and the stock market to dip further.” Noritaka Akamatsu said.

The World Bank analyst also proposed that the problem should be dealt with, more importantly, investment funds should be diversified, including the pension funds and insurance funds, Viet Nam will no longer have to cope with the problem, the newspaper said May 5.

Unluckily, Viet Nam has no funds like that, investing in the securities market is too risky and speculation may shock the market, the World Bank official warned.

To cool down the overheated market, the State Bank of Viet Nam issued Instructive 03 to ask commercial banks to limit loans for securities investment, which caused the fault, he pointed out.

To dodge the instructive, banks started to slash loans for securities trading and raised total outstanding loans, he added.

Instead, banks shifted to providing loans to invest into property, to buy other assets, he said, warning that problems caused by the property market are more serious than those by the stock market.

So far total loans lent by banks to invest into the property market account for 10 per cent of total credits, however, the real math is much higher, he said.

Bonds are a key instrument, compared with the stock market, he added.

Regarding the dominant stake holding by the State in the process of selling shares in state-owned enterprises via initial public offerings, the government should reduce its ownership step by step and diversify share-offering channels, he said.

Viet Nam’s shares index lost 1.66% at 492.09 points on local selling on fear of further falling prices due to lack of dong under the tightened monetary policy being adopted by the government of Viet Nam to curb galloping inflation. (Vietnam Economic Times)

Central Bank Official Proposes Measures to Support Stock Market

Thursday, May 15, 2008
Nguyen Dai Lai, deputy director of central bank’s Banking Development Strategy Department, have given some proposals to support the stock market in a context of an unstable financial market.

First, the government should issue long-term bonds with maturity of ten years or more and interest rates fixed in every two years, to ensure the buyers to not have less profit than depositors. The proceeds should be invested in national key projects in manufacture, high technology, infrastructure development, transport, education and training and health care.

Second, Vietnam should conduct IPO of large-scaled companies, but let the market decide the initial prices. Lai explained that most of Vietnamese companies used to offer high prices at their initial public offerings, making commodities of the stock market to have lower quality in comparison with the prices.

Third, commercial banks should be required to spend a certain savings ratio to invest in long-term government bonds deposited at central bank, as a safe tool to access to the open market in case of liquidity risk.

Four, securities companies should be encouraged to open depository trading accounts at commercial banks for better management.

Fifth, the country should have policies to enable big importers of goods and services to issue foreign currencies bonds in domestic market to raise funds.

Sixth, Vietnam should make a list of debit securities for discount and rediscount in order to boost liquidity for the stock market.

Lai said the financial market has recently had instabilities.

The stock market is a medium and long term investment market, but many investors have borrowed short-term loans to invest in this market, creating an incoherent link between the stock and monetary markets.

Debit securities make a small contribution of commodities in the stock market, because authorities have unintentionally drive investors’ interest in capital securities.

Commercial banks are facing a severe shortage of cash, while it is still superfluous in circulation, causing the inflation to rise 21 per cent on-year in April.

After eight years of operation, the stock market now is not proved as an effective channel for raising capital in medium and long term for the economy, Lai said. (SBV)

Stock market marks 9th consecutive decline

Thursday, May 15, 2008
Today stock market continued falling, marking the ninth consecutively decreasing session. The VN Index slipped another 8.83 points or 1.85% to close at 466.67 pts with the total matching order trade of 2,488,880 shares and fund certificates worth 117.777 billion dong.

Among 154 shares and fund certificates being listed on the southern bourse, the stock market witnessed two shares increasing while two others with no traders and 150 others decreasing to the floor price.

Two gainers were VHG and PMS by adding 500 dong to 27,300 dong and 29,200 dong per share.

Two shares with no trades were DPM and HRC.

DPR took the first place in trading volume with 174,740 shares, DPM with 114,400, VHG (88,640), STB (76,900) and VHC with 73,570 shares.

Foreign investors bought 47 share codes and one fund certificate with the total volume of 614,230 shares and fund certificate, of which DPR reached the biggest trading volume with 128,480 shares, ITA with 66,200, VHC with 50,000 ad VHG with 48,650 shares.

Like the southern bourse, the Hanoi Securities Trading Center (HaSTC) today May 15 still kept decreasing impetus from previous trading sessions on the stock market by falling another 2.76 points or 1.91% to end at 142.09 pts with the total market trade of 812,050 shares worth nearly 26 billion dong.

Amongst 136 listed shares on the northern bourse, the stock market recorded four shares increasing while 102 others decreasing, two shares stood still and 28 shares with no trades.

Four shares increasing were CAP up 400 dong, CJC added 200 dong, NVC and VTS jumped 500 dong per share.

Two shares stood still namely KBC and TKU.

MIC showed the strongest decline when losing 3,100 dong and followed by ACB lost 1,900 dong, VSP slipped 1,800, BVS slipped 1,700, SCJ plunged 1,600, RCL tumbled 1,500 and NBC and VDL dropped 1,300 dong.

ACB, TBC and NTP reached the biggest trading volume with 119,400 shares, 118,700 and 100,200 shares respectively. Others reached the trading volume of below 100,000 shares like NVC, VFR and POT.

HSBC sells insurance, seeks additional Vietnam insurer

Thursday, May 15, 2008
HSBC Holdings Plc, Europe’s biggest bank by market value, plans to start selling life insurance next month through a joint venture in India.

The venture, owned with Canara Bank and Oriental Bank of Commerce, is licensed to sell eight life-insurance and savings products and is “going very well,” Clive Bannister, HSBC’s London-based head of insurance, said.

The bank, which bought a 10% stake in Viet Nam’s Bao Viet Insurance & Finance Group in September for US$255 million, will use its option to buy an additional 8% in the biggest state-owned insurer by June 2009, he said.

HSBC has a target of gaining 20% of earnings from insurance “over time,” said Bannister.

The division contributed pretax profit of $3.1 billion or 13% of earnings last year, compared with 10 (Bloomberg)

Fund manager sees ‘trying times’ ahead for stock market, economy

Thursday, May 15, 2008
The Vietnamese stock markets and economy will struggle further in coming months, with corporate margins and business plans likely to suffer as a result, a Vietnam-focused fund manager told investors.

The Ho Chi Minh Stock Exchange’s VN Index fell Wednesday for an eighth trading day to the lowest close since August 2006, and is down 49% this year.

Inflation rate is at the highest level since at least 1992, while the country’s trade deficit almost quadrupled in the first four months of this year.

In this scenario, HCMC-based VinaCapital Investment Management Ltd. said in a monthly note to investors posted on its Web site, “The next few months will continue to be trying times for both the market and the economy.

“All economies go through growing pains, and we remain positive about the medium- to long-term outlook.”

Inflation was “very high,” creating a restrictive environment for banks, Vinacapital, which manages three UK-listed funds, said.

“Margins are decreasing with banks borrowing short at high interest rates and lending long mostly at past lower rates.

“The high lending rates along with State Bank [of Vietnam]-imposed credit limits and the international economic slowdown will likely affect many business plans this year.”

Loan portfolios

Banks’ loan portfolios will probably “decrease sharply,” as the level of deposit rates forces them to lend at rates as high as 22% “to make a meaningful profit” the note said.

Le Minh Hung, director general of international cooperation at the central bank, speaking at an Asian Development Bank forum this month said the government was now targeting economic growth of 7% this year, down from a previous forecast of 8.5 to 9%.

Standard & Poor’s Ratings Service this month cut its outlook on Viet Nam’s credit rating to negative from stable, citing “rising risks to macroeconomic stability from an overheating economy.”

“Given the unproven risk-management capability of domestic banks, an unexpectedly severe slowdown in economic growth could see sharply higher loan losses at many of these institutions,” it said.

“If the subsequent regulatory response is inadequate, this could potentially develop into a situation of systemic financial distress that could only be resolved at substantial cost to the government.”

Indochina Capital Viet Nam Holdings Ltd. said in an update to investors posted this month on its Web site that the government’s policy transparency in response to fighting inflation had been “poor.”

“The market has been left to speculate [about] the seriousness of the government’s intention to combat inflation with tougher measures including severe reductions in fiscal spending and exchange-rate liberalization, which would likely lead to a substantial appreciation of the Vietnamese dong against the dollar,” Indochina said.

STOCK BRIEFS

Agrochemical firm posts higher net

General Materials Biochemistry Fertilizer Joint Stock Company announced Wednesday that its first quarter net income rose to VND14.3 billion (US$884,900), a 31% increase from VND11 billion the previous quarter.

The firm, which produces fertilizers and other agrochemical products, said the net rose because of a spike in market prices.

Pha Lai executive raises stake

Dam Minh Duc, a member of the Pha Lai Thermal Power board, raised his stake from 1.96% to 2% by buying 36,000 shares out of one million he registered to buy, the Ho Chi Minh Stock Exchange said on its Web site Wednesday.

Bulb maker reports shining first quarter

Rang Dong Light Source and Vacuum Flask said its first quarter net income jumped 167% from the previous quarter to VND32.6 billion (US$2 million).

The firm, which manufactures fluorescent lighting products and thermos bottles, said it had cooperated with strategic partners to stock up feedstock before prices rose, helping keep costs low.

Tan Viet cuts stake in concrete maker

Tan Viet Construction Co. Ltd. last week sold 860,465 shares in construction materials producer 620 Chau Thoi Concrete Joint-Stock Company to reduce its holding from 18.02% to 10.2%, according to a report on the Ho Chi Minh Stock Exchange’s Web site Wednesday.

Closed-end fund executive halts stake sale

Huynh Que Ha, deputy chairman of closed-end fund VF1, reduced her stake in the fund from 5.65% to 5.67% by selling 14,000 shares, the Ho Chi Minh Stock Exchange reported on its Web site Wednesday.

Ha planned to sell three million shares but called off the sale February 14 after selling the 14,000 shares because the market was depressed.

Pitco’s pre-tax profit rises on business expense’s decrease

Petrolimex International Trading Joint Stock Company said on the exchange’s Web site Wednesday its first quarter pre-tax profit reached VND13 billion (US$804,704), a 160.57% quarter-on-quarter increase from VND5 billion.

The company, which is industrial and agricultural commodities trader known as PITCO, said business expense in the first three months of the year was less than last quarter, boosting the pre-tax profit.

Tan Tao says first-quarter profit up 29%

Tan Tao Investment Industry Corp., an operator of industrial zones, said the net profit for the first quarter ended March 31 rose 29% year-on-year to VND101 billion (US$6 million), according to a statement posted on its Web site. (Bloomberg)

Vietnam central bank offers lenders funds to support liquidity

Thursday, May 15, 2008
The State Bank of Viet Nam (SBV) will provide funds to ensure commercial banks maintain adequate liquidity as it tightens monetary policy, it said in a statement posted on its Web site late Tuesday.

The central bank will help commercial banks obtain funds by mortgaging their securities with it and through credit contracts, the statement said.

There are currently 90 commercial banks licensed to operate in Vietnam.

“Most of the banks are fully stretched with ensuring liquidity,’’ said Le Ba Hoang Quang the Hanoi-based head of research at the securities unit of Saigon Thuong Tin Commercial Bank Joint-Stock Co.

“Despite an increase in deposit rates, the capital of commercial banks is not abundant enough at the moment as a result of tightening monetary policy.’’

The SBV has raised interest rates, increased the amount of funds banks must set aside as reserves, and allowed the dong to strengthen to cut money supply and slow the pace of inflation.

Consumer prices in the Southeast Asian nation increased 21.4% last month, the fastest pace since at least 1992.

Vietnamese commercial banks on April 29 agreed to raise dong deposit rates by 1 percentage point to 12%.

In a separate statement earlier this week, the central bank said total outstanding loans of local banks rose 1.66% in April.

Loans denominated in foreign currencies increased 1.64% from the end of March, while those in dong rose 1.66%, according to the statement.

It did not provide figures of the absolute amount.

Total deposits in the month rose 1.2%.

Monetary policy not enough to control inflation: bank strategist

Thursday, May 15, 2008
State Bank of Vietnam’s strategy director Le Xuan Nghia says the interest rate cap needs to be removed and refinancing rates increased to ensure the long-term success of the government’s anti-inflation moves.

In the following interview, Nghia discusses why he thinks the government is depending too much on monetary measures to fight inflation.

Of all the measures battling inflation, which one is having the greatest impact?

Le Xuan Nghia: The government’s monetary and other policies are showing their effects.

The consumer price index in March was much lower than it was in February, and the April index was much lower than March.

In other words, the pace of price increase is being contained and has even begun declining.

Yet, an overview reveals that most of these measures are monetary, including a credit policy designed to boost food supply.

Non-monetary policies – such as fiscal and price control policies – have not been strong and are not showing their effects.

If we only rely on monetary policies to fight inflation, such policies will eventually have a great negative effect on economic growth.

Tight monetary policy will slash liquidity throughout the whole economy, especially for businesses.

So in the future, it might be best to speed up other policies to complement a tight monetary policy.

Inflation is declining gradually, but as you say, new problems are arising. The cash shortage you mentioned is already making it difficult for businesses to invest. What do you think about this?

For one thing, monthly inflation is declining, but by the end of the year annual inflation might be higher than last year.

For middle-term goals, however, inflation will be contained as inflation in Vietnam is moving in the same direction as credit growth.

In the first four months of this year, credit growth was quite high – above 14% – because of credit contracts signed last year that have taken effect this year.

However, credit growth in April went down sharply to only 1.6% per month.

Suppose in the next eight months, credit grows by the average rate of 2% a month, then by the end of this year, it will be around 30%.

This is a considerable decline from the 54% credit growth in 2007.

This is a big success, and its downward pressure on inflation will surely be felt in the price indexes through the last months this year, as well as the beginning of next year.

But some say the economy is “bleeding.” In what part of the monetary policy do you think the problem lies?

The problem to be concerned about is liquidity – at banks and throughout the whole economy.

The State Bank of Viet Nam has promised to help ease commercial banks’ liquidity crunch.

But that is not the problem.

The problem is that with so low an interest rate cap as we now have, a large amount of cash – both businesses’ and the general public’s – is not deposited at banks.

Businesses with idle money often save it, lend it to other businesses, or even spend it to stockpile raw materials and imports.

For instance, in the first four months of this year, the amount of imported steel almost equaled last year’s total figure.

And the gold imported so far this year surpassed last year’s number.

The stockpiling of paper, agricultural tools and equipment and industrial raw materials has also become common as businesses predict that after June, the prices of various essential items such as oil and gasoline, steel, electricity, cement and fertilizer will shoot up.

Many businesses have even mobilized money from employees, friends and relatives to hoard goods, increasing the widening trade deficit.

So the fact that there is a large amount of money being circulated outside the banks is making it much more difficult for banks facing the liquidity crunch.

This is also making it difficult to control inflation.

How can banks attract deposits if they insist on keeping their current cap on interest rates?

It is necessary to provide a channel for idle public money as it is a key source to offset the liquidity shortage.

For banks to attract deposits, the only way is to remove the interest rate cap alongside the central bank’s open market operations and interest rate adjustments.

Getting rid of the interest rate cap may prompt an interest race as banks raise rates to compete with each other, but this will only be a short term problem and should not be alarming.

In the US, large commercial banks offer annual deposit interest of 3.25 to 3.75%, while smaller banks pay up to 5.25%.

The simple reason is that small banks lend to businesses that can afford high interest rates.

These are precisely the businesses that bigger banks do not target.

I think there will be difficulties if we do not remove the interest rate cap and increase the refinancing rate.

Central bank refinancing cannot replace deposits by businesses and the public. (Tuoi Tre)