Wednesday, August 09, 2006

VNECONOMY updated: 08/08/2006

Vietnam’s stock market has been open for seven years but it has not lived up to expectations as it continues to grow but has not yet matured.
Rapidly Growing Stock Market
Growing 88 percent annually, Vietnam’s stock market is currently thriving. The debuts of dozens of large companies, such as Vinamilk, Sacombank, and Vinh Son – Song Hinh earlier this year tripled the local stock market’s growth rate.
So far the number of investors has been up to more than 60,000, double the total number counted at the end of last year and 20 times higher than the first year of the market's inception.
Those investors, together with surging prices early this year, have raised the total value of security transactions in the first six months up to more than US$2 billion, three times the growth to the same point last year.
As well, the average matched price in each trading session is up to around US$5 million.
Foreign-invested enterprises have gradually begun to put their trust in Vietnam’s stock market. Particularly, more than 20 percent of the total year-on-year increase in value came from more than 1,000 foreign investors.
So far, the total capitalized market value including bonds has made up more than 10 percents of gross domestic product (GDP), in line with projections of the 2010 local market development strategy 10. The total capitalized market value of stocks now reaches nearly 5 percent of GDP, 2 – 3 percent higher than the projected level of GDP in 2006.
Non-synchronous Mechanisms
Though the market has rapidly developed recently, the legal corridor, technical infrastructure and trader skill levels are not up to par. The Law on National Security was issued after the stock market was open for six years, and it came into effect one year later. Meanwhile the Business and Investment Laws became effective in the middle of this year. But this delay has caused a lack of legal support for the stock market's development.
Only Vinamilk reached its true potential in the first months of this year due to a shortage of goods that the company was in turn able to supply. However, when the hot demand cooled down, a variety of goods moving into the market caused superfluous supply.
Situations like this indicate that only large mega-companies are able to stay afloat when the market sinks, a situation that is in need of correction.
Mechanisms for transaction security have also not met the demand of investors yet. When the stock market hit its peak early this year, many investors complained that their orders got stuck were not input into the system due to the surging number of investors.
Despite the Ho Chi Minh City Securities Trading Center's (STC) extension of the trading floor paving the way for securities companies to increase the amount of input and phases in trading sessions, and despite the upgraded the trading system, the situation has not improvement. A modern trading system enabling customers to trade through internet is required now.
As the securities companies focus solely on receiving orders, they do not have time to offer their customers professional advice on trading stocks. Recently, securities companies, securities investment funds, and listed companies in cooperation with the STC, have held monthly online talks with investors without producing many results.
Lacking knowledge and experience, many local investors tend to buy company stocks even when they don't even know what company is or does, which causes a virtual increase in stock prices.

Tuesday, August 08, 2006

Stock market moves ahead after slump

HCM CITY — Last week’s two final trading days saw a spectacular rise in the VN Index of almost 18 points per day, regaining momentum after days in decline.

The index tumbled almost 35 points last Monday and Tuesday, slowing the following day to a decline of just over five-points, coming to rest at 388.82 last Wednesday, the lowest level since it reached its historic height of 638.86 on April 25.

The result was a net decline of more than four points from the previous last Friday (July 28) as it closed at 435.5 at close last Friday.

Sacombank, the largest listed business played a significant role in the falls due to its various declines since its first trading day on July 12 when its price stood at VND78,000. It then strengthened to VND81,500 and since that peak, slid to only VND58,500 last Wednesday.

After five trading days, 20 out of 45 listed firms saw their value enhance while another 19 weakened and the remaining five stayed put.

The five were the canned food maker CAN, at VND24,000, construction stone DHA at VND56,000, the electric equipment and installation firm Full Power (FPC) at VND38,000, backpack Khahomex (KHA) at VND22,000 and trader Thien Nam (TNA) at VND42,000.
Of the gainers, the freight forwarding Vinafco (VFC) led the way, enjoying an 8.78 per cent rise, to VND28,500.

Agifish (AGF) was the hardest hit, falling 10.79 per cent, to VND62,000, while Sacombank (STB) sunk by 5.19 per cent to VND64,000.

Between July 31 and August 4, almost 18.8 milion securities were traded, valued at VND1.389 trillion. Bonds represented almost a half of the trading volume but 68 per cent of the total value. Shares accounted for over 46 per cent of the total securities and 31 per cent of the value, while certificates and the VF1 fund accounted for 4.6 per cent and 1.2 per cent respectively.

Sacombank topped in liquidity as more than 1.8 million shares were transferred and Vinamilk followed at a distance with a quantity of 742,000 stocks. TNA accounted for the smallest volume of over 5,000 units.

Foreign investors continued their buying in (excluding bonds), to capitalise on falling share prices. While they sold only 69,000 shares for around VND3.5 billion last week, they paid over VND61 billion to acquire 1 million shares and VF1 certificates with the later presenting only 4,200 units.

Their portfolio covered almost all shares on the board, but priority went to Sacombank, Sudico (SJS), REE, Gemadept,Vinh Son-Song Hinh (VSH) and Vinamilk.

In June foreign investors purchased more than 3 million shares and in July, over 8 million shares. They sold only around 1.1 million shares in the two months.

On the downward price, there were complaints from domestic investors on the sharp increase of the number of listed companies, causing share supply to outpace demand. However, Vu Thi Kim Lien, Vice Chairwoman of the State Securities Commission said its normal for her commission to issue licenses as the new companies meet all requirements to list.

Investors also said commercial banks tightening up on loans that use securities as collateral had a negative impact as it reduces the financial capacity of investors.

The Viet Nam Association for Financial Investors (VAFI) has called for a maximum widening of the room for foreign investors in a listed firm to 100 per cent, from the current 49 per cent, expecting the higher rate will attract more participation from foreign investors thus reducing the gap of supply and demand. — VNS

Comeco to start trading today

HCM CITY — The Petroleum Material Joint Stock Co (Comeco) will join the Vietnamese stock market today.Comeco will float 3.4 million shares, coded COM, worth a total of VND34 billion (US$2.1 million) on its first trading day at the HCM City Securities Trading Centre.Comeco was established in 2000 with an initial chartered capital of VND25 billion ($1.5 million), a figure that has since been raised to VND34 billion. The company issued an additional 900,000 shares in June 2005.The company specialises in civil and industrial construction; leasing offices and warehouses; importing and exporting petroleum, gas, chemicals, petrol station equipment; and logistics.

Thursday, August 03, 2006

Market continues downward spiral

The prolonged slide of the Vietnamese bourse is continuing in early August, as domestic investors sell-off, in what market analysts are calling “herd effect”.

Vietnam’s stock market declined Tuesday, dropping 17.54 points to 404.87 as 42 of 45 corporate listed stocks fell, with domestic investors playing ‘follow the leader’, refusing to buck the market trend.

The value of many shares on the exchange had fallen by as much as 30 percent in the past two months and VN-Index has lost a heady 200 points since May.

However the stock trade volume and value rose around 25 percent at yesterday’s session over the previous day to 1.34 million shares and VND66.7 billion (US$4.2 million).
Blue chips recorded the highest volume due to concerted investor strategies, such as STB of Sacombank with 167,240 shares, REE of Refrigeration Electrical Engineering Corp., with 166,200 shares and VNM of Vinamilk with 161,900 shares.
The STB trading volume dropped a further 16.7 percent from the previous day but that of REE and VNM soared 151 percent and 75 percent respectively.
Other heavyweight trade stocks included Vinh Son-Song Hinh Hydropower Joint Stock Company (VSH) with 102,660 units, TYA Vietnam (TYA) with 63,630, Gemadept (GMD) with 63,170 and Samco (Sam) with 53,780.
These stocks make up two-thirds of the total trade volume and three-fourths of the value.
Banks have said that insufficient capital flows into securities was not the main reason for the market cool, as commercial banks continue to expand lending against stock collateral.
Lenders said the loans remained safe despite the volatility of the market over the past two months.
Vietnam International Bank (VIB) reported its current loans to the sector accounted for roughly 5 percent of the bank’s total loans.
Instead of lending only against bank stocks, VIB now offers loans against 29 different types of stocks ranging from shares in hydropower plants to insurance and information technology stocks.
The latest figures issued by commercial banks in May showed that 13 million shares worth VND751 billion ($47 million) on the market were used as collateral for loans.
Source: Vietnam Economic News

Tuesday, August 01, 2006


Government bonds worth VND300 billion (nearly US$18.8 million) in total will be put to auction at the Ha Noi Securities Trading Centre on the afternoon of July 31.
The five-year bonds, having a face value of VND100,000 (roughly US$6.25) each, will be issued by the State Treasury on August 2. The bonds will be released in the form of book-entries, with the interest being paid annually.
Viet Nam plans to issue VND110 trillion (nearly US$6.9 billion) worth of Government bonds during the 2003-2010 period under a decision signed by the Prime Minister on July 24.The bond issuance, which has been introduced in both Vietnamese dong and US dollars, aims to boost investment in a number of key projects.The capital will be disbursed by the State Treasury in accordance with implementation progress of these projects, thus ensuring capital supply for these projects to be completed as scheduled.

Thursday, July 27, 2006

By Frederik Balfour

Vietnam, Land of Milk and Money
A stock-market boom, IPOs, and expanding foreign capital have caught investors' eye. Their latest toast? A dairy outfit that doubled the bourse's valueOn a good day, the big bourses in New York, London, or Tokyo might jump by 1% or 2%. So imagine the excitement on Jan. 19, when the total value of the stock exchange in Ho Chin Minh City doubled to 16 trillion.

'That's right. Doubled. But before you dump your Google shares and pile into the market, read on. That 16 trillion dong, the local currency, equals just over $1 billion. Compare that to the $18 trillion value of all the shares on the New York Stock Exchange.
What's more, the jump was almost entirely due to the listing of one new stock: Vietnam Dairy Products Joint-Stock Company, or Vinamilk. The company on Jan. 19 made its much anticipated debut as the 34th enterprise to list on the Ho Chi Minh City Stock Trading Center. It's shares opened at $2.65, and by the closing bell had climbed to $3.34. That gave Vinamilk a valuation of roughly $531 million, or more than all the other companies on the exchange put together. Vinamilk's listing is nothing short of a milestone. Vietnam's stock market has been something of a joke for much of its five-and-a-half-year history. Trading on its first day in July, 2000, amounted to just $37,000, and it's been a slow grind since then. In 2005, the average daily volume was just $700,000. Worse, an unregulated curb market of shares in unlisted companies sees transactions worth several times what the official bourse handles on any given day. "We still have a way to go," says Dominic Scriven, a director of Dragon Capital, a Ho Chi Minh City-based fund management company with more than $350 million under management.
A company of Vinamilk's heft is just what the market needs to create more buzz. Vinamilk is widely regarded as one of Vietnam's best-managed companies, with earnings last year climbing 31%, to $38 million on sales of $356 million, up 50% from 2004. Despite competition from foreign rivals Formosa Milk and Dutch Lady, Vinamilk still has 75% of the market for milk products, yogurts, and fruit juices. And a week before its listing, the company announced plans to open a $45 million brewery with a capacity of more than 13 million gallons annually in conjunction with London-based SABMiller. The listing has created a lot of excitement about the market. Vinamilk "will undoubtedly attract larger foreign investors due to its size and liquidity," says Jonathon Waugh, director at PXP Vietnam Asset Management, which runs a Dublin-listed fund that invests in Vietnamese equities, including Vinamilk. "People have been ringing up saying, 'How do we get a piece of this?'"
More foreigners will be able to get a piece of Vinamilk and other Vietnamese companies now. While foreign ownership is capped at 30% for unlisted Vietnamese companies, a new law passed in October, 2005, to promote greater liquidity on the stock market allows for listed companies to sell up to 49% to non-Vietnamese investors. Prior to the listing, foreigners including Singapore-based drinks company Fraser & Neave and Dublin-listed Vietnam Enterprise Investment owned about 28% of Vinamilk. For those who miss out on Vinamilk, more big listings are in the pipeline. Ho Chi Minh City-based lenders Asia Commercial Bank and Sacombank together could add $600 million to market capitalization when they list later this year, Waugh estimates. Other candidates include the No.2 mobile-phone operator, Vinaphone, and Hanoi-based Vietcombank. Tran Dac Sinh, director of the exchange told Bloomberg news he expects the market size to reach $3 billion by yearend. Vietnam's booming economy might also draw the attention of foreign investors. Last year the country attracted $5.8 billion in foreign direct investment, as money poured into pharmaceuticals and shoe and mobile-phone manufacturing. Gross domestic product increased 8.5%, up from 7.8% in 2004. The economy is expected to grow 8% in 2005, to $60 billion. That's $720 per capita in this country of 84 million. "A BIG CHANGEOVER."
Much of that growth has come thanks to a surge in exports. Since a bilateral trade agreement with Washington took force at the end of 2001, exports of textiles, Nike shoes, and seafood have soared. Shipments to the U.S. have increased sixfold since the pact, to $6.5 billion last year. Private-equity and venture activity are picking up, too. Last year International Data Group launched a $100 million Vietnam fund, while another Dublin-listed outfit, Vietnam Opportunities Fund, now has a $171 million war chest after raising an additional $76 million in 2005. "There's been a big changeover in the past year," says Milton Lawson, a lawyer with Freshfields Bruckhaus Derringer in Ho Chi Minh City. "People are getting quite keen."

Vietnam's stock market is booming
Since Dec. 30 the Vietnam Stock Index is up 60%, and it's the second-best-performing exchange in the world this year (behind only Zimbabwe's).

Sheridan Prasso
April 12, 2006: 6:32 AM EDT

(FORTUNE Magazine) - Three decades after the end of the Vietnam war, corks are popping in Ho Chi Minh City. The reason might make the man for whom this town was named spin in his grave: Vietnam's stock market is the second-best-performing exchange in the world this year (behind only Zimbabwe's).
Since Dec. 30 the Vietnam Stock Index is up 60%. And from a market capitalization of $144 million for 22 listed companies two years ago, it has increased more than tenfold, to $1.5 billion for 35 companies today.

That's not bad for an exchange that only started trading in July 2000.
Expectations are for the total market cap to double again by the end of this year.
"It's starting from a very low base, so you have nowhere to go but up for the next three to five years," says Don Lam, who runs VinaCapital in Ho Chi Minh City and operates the largest fund through which foreigners can invest in Vietnamese stocks, the $300 million Vietnam Opportunity Fund, traded on the London Stock Exchange.
Vietnamese companies are undervalued by global standards, says Tran Dac Sinh, CEO of the Vietnam Stock Exchange, who cites an average price-to-earnings ratio of 11.9 for Vietnamese companies, compared with 18 for Chinese.
Other factors fueling Vietnam's stock boom include a fast-growing economy (8.4% last year); reforms allowing foreigners to hold 49% of public companies; and a push to encourage state-owned companies to go public. "Things have changed a lot in Vietnam," says Lam. "Americans are the only ones still thinking about the war. The Vietnamese have moved on."