Vietnam’s securities fascinate foreign investors (12/12)
06/08/2010 - 315 Lượt xem
At 6.45 am of December 1, 2006, when Alain Cany, Chief Executive Officer of the Hong Kong and Shanghai Banking Corporation (HSBC) answered a BBC interview on Vietnam’s financial market, in the Fullerton Hotel, Vietnamese enterprises are preparing for a working day with international financial groups in Singapore. At the same time, officials from the Steering Committee for Enterprises Renovation and Development of Vietnam, the State Capital Trading and Investment Corporation, State Securities Commission were having breakfast, while talking with investors. An optimistic atmosphere pervaded the Vietnam’s Day, an important event organized by HSBC and the Saigon Securities Incorporated (SSI) in Singapore.
Why are investors optimistic?
Tran Dac Sinh, Director of the HCM City Securities Trading Centre said after the working session with Singaporean Stock Exchange: “Singapore is ready to assist Vietnam to connect Singapore’s and other ASEAN countries’ capital markets and create favourable conditions for Vietnamese enterprises to list at the Singaporean bourse”.
Garry Evans, the analyst specializing in Asia Pacific securities market under HSBC Hong Kong, said: “Vietnam’s securities are open to foreign investors, even more widely than China’s or India’s”.
Analysts said that international financial investors are now interested in Vietnam for three reasons.
First, Vietnam’s securities have witnessed a growth rate of 19% over the last three months, according to a report released by HSBC, which is not seen in any other regional stock markets.
Second, a large number of companies to be listed on the bourse in the last months of the year will lead to the sharp increase of the market capitalization volume. Meanwhile, some $1.8bil in capital, that foreign investment funds have raised, are waiting to be disbursed.
“We see Vietnam as the most attractive market in Asia,” HSBC representative told investors at the Vietnam’s Day in Singapore.
Where does the attractiveness comes from?
Mr Garry Evans said that Vietnam’s securities prices are not expensive nowadays, while the corporate governance of Vietnamese listing big companies, the ‘blue chips’ prove to be even better than in Chinese companies.
An HSBC survey showed that in 2005, the P/E index (price on equity) of Indian securities is 19, of Chinese securities is 16, while the figure is 15 for Vietnam’s securities (low index means cheap securities prices). The figures for 2006 are 30, 25 and 22 respectively (by November 22, 2006).
In China, the maximum share proportion foreign investors can hold in a listing company is 30% of total chartered capital, while in Vietnam, foreign investors can hold up to 49% of total shares, while the proportion may be higher, up to 100%, in some fields.
In China, the process of transferring ownership in state owned enterprises is called ‘privatisation’, but it is not the privatization in the true sense of the word. In Vietnam, the process is referred to as ‘equitisation’, but it proves to be closer to the privatization, Mr Evans said.
However, the attractiveness of Vietnam’s securities does not lie in these common figures, but in the potential growth. Now the investment funds in Vietnam are witnessing profit growth of 25-30% per annum, and the figure is expected to be even higher in the next few years. In the last three years, foreign investors have been rushing to purchase the certificates of the investment funds listing in London and Dublin.
From January to September of 2006, the Vietnam Enterprises Investment Limited (VEIL) fund saw the growth rate of 65% (it was 80% by November). The growth rate for Vietnam Growth Fund is 36.5%, for Vietnam Dragon Fund (which has called for investment capital recently) is 15%. All the three funds are being managed by Dragon Capital Company.
At the same times, the growth rate gained by Vietnam Opportunity (VOF), managed by VinaCapital is 35% (it was 50% by the end of November), Phanxipan Fund is 41.8%, and Vietnam Emerging Equity is 24.8% (both of them are being managed by PXP Vietnam Asset Management Company).
A question has been raised; why do investors prefer injecting money in investment funds, while not purchasing Vietnam’s securities?
There are three reasons.
First, the procedures to get trading codes prove to be too complicated.
Second, investors do not have much knowledge about Vietnam’s laws and regulations as well as the relations in Vietnam. And the most important thing is that they do not believe in domestic brokers, while Vietnam still does not have international securities brokers.
In Vietnam, 100% foreign owned securities are now allowed to set up. Only securities trading joint ventures can be established in Vietnam, in which, foreign partners can hold up to 49% of the total capital.
“We will join the market once there are 100% foreign owned securities companies,” an investor said.
Thirdly and finally, the liquidity is low, and the scale of the market is small. Big investment funds still hesitate to inject money in Vietnam’s market despite the rapid increase of the market capitalization.
Nguyen Xuan Minh, Deputy Chairman of Templeton Asset Management said that it is not worth making investment of just several tens million dollars, even if the profit rate is attractive. Meanwhile, big investment funds in Singapore now have the total assets of several tens billion dollars for each.
“If the market capitalization volume reaches $20 or $30bil, more and more investment funds will join the market,” Mr Minh said.
Meanwhile, the VN Index of Vietnam’s stock market has not been listed in MSCI (Morgan Stanley Capital International). MSCI is an independent organization, which has been referred to as an internationally recognized index, a benchmark for the world’s securities market, where all the securities indexes of Asian stock markets gather. If Vietnam does not join such an organisation, how can international financial investors know about Vietnam and come to Vietnam?
Money ready for disbursement
According to HSBC, the total capital raised by investment funds to inject in Vietnam has been increasing rapidly, reaching $1.8bil by the end of November 2006, and has not been disbursed yet.
Of this amount, there is the $305mil sum of VinaCapital, $200mil of Dragon Capital, $129mil of Vietnam Holding. Meanwhile, PXP Asset Management is ending the $100mil fund raising for Vietnam Lotus Fund in some days. Horizon and Black Horse Capital, the two fund management companies are planning to set up new funds. Jardine Fleming has announced that it will close a new fund by the end of this month.
Besides, Japanese and Korean investors have also brought capital to Vietnam.
Sumitomo Mitsui Asset Management has set up a new fund with $50mil in capital, while Korea Investment Trust has successfully raised several hundred mullion dollars.
With these sums of money will be injected in Vietnam’s stock market at the same time? The answer is “No”.
The money will be disbursed when the biggest companies in Vietnam like Vietcombank (Vietnam Bank for Foreign Trade), MHB (Mekong Delta Housing Development Bank), Vinaphone and MobiFone, the two biggest telecommunication service providers, and petroleum companies launch IPOs (initial public offering).
The total market capitalization volume, both at the Hanoi and HCM City Securities Trading Centres, according to HSBC, is estimated at nearly $9bil. As such the said $1.8bil sum is equal to 20% of the total market capitalization.
And now more information: foreign investors are holding 31% of the total value of listing shares in Vietnam.
Source: TBKTSG
