Enterprises have had to cancel their plans to issue more shares to raise their chartered capital, since the share issuance surely cannot bring the desired effects in the context of the market falls.

The continued decreases of bank shares have been depressing investors, and making share issuance plans by enterprises unfeasible. A lot of enterprises have said that they have had to cancel share issuances though they need huge capital for production and business.

The picture was quite different several months ago, when the stock market prospered and raising capital through share issuance was considered a simple thing. In the time from mid 2006 to the end of the first quarter of 2007, nearly all joint stock banks in Vietnam were busy with their plans to raise chartered capital in 2007. However, no bank dares issue stocks at this moment, when bank share prices have dropped by 50% over the beginning of 2007.

Experts say that there is a trend emerging of listing companies going to banks to ask for loans instead of arranging capital themselves by issuing shares.

Nguyen Phuoc Thanh, Deputy Director General of Vietcombank, said that many listing companies had abused the hot stock market in the last time to mobilise capital. Many of them even issued stocks to mobilise capital when they still did not have plans to use the capital. As a result, a big part of the mobilised capital has been deposited at banks instead of being injected in production and business.

Mr Thanh said that it was quite normal for enterprises to seek capital from different sources. If enterprises want to expand their scale, they should think of issuing shares, while if they want capital for business, they would seek working capital from banks.

Chairman of Sacombank Dang Van Thanh said that share issuance should not be suggested in all cases, as the massive issuance will cause dilution, thus making it difficult to attract investors. Mr Thanh said that enterprises should also think of issuing bonds, one of the effective tools of mobilising capital that has not been fully exploited.

When asked about the trend for the time to come, Mr Thanh from Vietcombank said that listing companies would not rely on share issuance as the main source of capital any more. If seeking capital from share issuance, enterprises will have to bear the pressure of paying dividends to shareholders, which always must be higher than bank’s interest rates.

Enterprises will see bank loans as a preferable source of capital as the loans are minimally risky, he said.

Source: DTCK.