Vietnam Overseas

Vietnam’s government raised at least $608 million selling a stake in Bank for Foreign Trade of Vietnam, letting foreign investors buy shares in a state-owned bank for the first time.

The government is selling a 6.5 percent stake with minimum bids of 100,000 dong ($6.24) per share. Foreigners are allowed to buy 30 percent of the 97.5 million shares. Bids averaged between 105,000 dong and 110,000 dong with more than half counted as of about 4 p.m. local time, according to Nguyen Thu Ha, deputy chief executive of the Hanoi-based bank.

The auction shows Vietnam’s commitment to its share-sale program, called equitization by the ruling Communist Party. The decision to carry out the sale, delayed from an earlier target date of August, suggests plans to sell stakes in two more banks as well as telephone and beer companies in 2008 are on track.

“It’s the most important equitization in Vietnam to date,'’ said Horst Geicke, a Hong Kong-based director of the U.K.-listed Vietnam Opportunity Fund Ltd. “This is one of the star companies in the eyes of the government, so the fact that they went ahead with this is the best possible signal that the equitization program will speed up in 2008.'’

The counting of bids may be finished today, and the result announced early tomorrow, according to Ha.

The first sale of a state bank comes more than two decades after Vietnam began moving toward a market-based economy, and less than a year after the Southeast Asian nation of 85 million joined the World Trade Organization.

Banking Industry

Registrations for the right to bid exceeded supply by 25 percent, with overseas investors accounting for about a third of demand, according to the exchange, where Bank for Foreign Trade, known as Vietcombank, plans to list next year.

“I’m happy with the number of investors, they were not fewer than what we expected,'’ Chief Executive Officer Nguyen Phuoc Thanh said in an interview at the stock exchange today.

Investor interest in the auction is being driven by paucity of supply in a country where only two lenders, Asia Commercial Bank and Saigon Thuong Tin Commercial Joint-Stock Bank, are listed on stock exchanges.

Demand is also underpinned by expectations of expansion in the banking industry that Deutsche Bank AG estimates may double Vietnam’s 8 percent economic growth.

The minimum price of 100,000 dong per share set in the sale was “very aggressive,'’ said Geicke. “But the auction was still oversubscribed and they didn’t have to twist anyone’s arms for that to happen. There was genuine demand.'’

Improving Competitiveness

Vietcombank has assets totaling 187 trillion dong, according to Ha. Vietnam’s fourth-biggest lender posted profit last year of 2.88 trillion dong, driven by business in import-export payments, foreign exchange, and automated-teller and debit cards, according to its latest annual report.

The share sale “should enhance its financial flexibility and, together with its intentions to bring new strategic investors, could help further improve the bank’s overall competitiveness,'’ Standard & Poor’s said in an April report when it assigned a foreign-currency rating of BB to Vietcombank. A BB rank is two levels below investment grade.

Vietcombank plans to choose two so-called foreign strategic investors in 2008, focusing on companies that can upgrade its technology and help with planned overseas expansion, the Saigon Times Weekly said on Dec. 13.

The bank had to abandon a plan of selling shares to strategic investors before the auction, U.K.-listed fund Vietnam Holding Ltd. said in a monthly report on Dec. 13.

Foreign companies that negotiated with Vietcombank for a stake in the lender only offered 60 percent of the asking price, according to the Saigon Times Weekly. (Bloomberg)

17:26′ 04/12/2007 (GMT+7)

VietNamNet Bridge – The State Bank of Vietnam has announced that non-listed commercial banks wanting to sell shares to foreign investors must have capital of VND1 billion and non-performing debt less than three per cent.

The announcement also said banks must be in the green for five consecutive years before selling. New announcement provides foreign investors more benefits. Shares to foreign investors and not have been fined over five million VND by the State Bank for management violations.

Foreign financial institutions wanting to invest in a local bank must have a recent global credit rating. If they want to buy over 15 percent stake, they have to have their request approved by the Bank Governor.

Banking experts said the announcement provides foreign investors more benefits; those with stakes in local banks below 15 per cent of total capital still have the right to increase their ownership.

According to the announcement, within thirty days of the State Bank Governor’s purchase approval, foreign investors must transfer all necessary funds in VND into an indirect investment account at a State Bank designated Payment Bank.

The Associated Press, posted Friday, October 5, 2007

Taiwanese laptop maker Compal Electronics Inc. has received a license to invest US$500 million (€354 million) in manufacturing facilities in Vietnam, the second major high-tech investment announced for the country in little over a month, reflecting its growing appeal to global electronics companies.

The investment license, issued by northern Vinh Phuc province near Hanoi, is a green light for Compal to start building production facilities in the Ba Thien Industrial Park this year, said Nguyen Van Lai, director of the province’s investment department.

The Taiwanese company, the world’s second-largest contract maker of laptop computers by output, aims to produce 800,000 laptops in 2009 in Vietnam and 6.5 million laptops in 2010, most of which will be for export, Lai said.

Compal’s investment plans underscore Vietnam’s growing appeal as a location for high-tech manufacturers, who value the country’s inexpensive labor force and relatively stable economic regime.

In late August, Taiwan’s Hon Hai Precision Co., the world’s biggest electronics contract manufacturer by revenue, said it would quintuple its planned investment in Vietnam to US$5 billion over the next five years.

Last year, U.S.-based Intel Corp. said it would build a US$1 billion semiconductor testing and assembly plant near Ho Chi Minh City in the south. Call centers and other outsourcing operations also have established themselves in Vietnam.

Lai said the provincial authorities have agreed to provide 360 hectares of land to set up factories, where Compal and about 24 other Taiwan companies have pledged to invest a total of US$1.1 billion by 2012.

Compal said these companies will serve its demand for electronic parts, and will also produce parts and accessories for cell phones and personal computers, according to Lai.

Compal said it is investing in Vietnam because of customer requests.

“We are currently investing in Vietnam, because of our customers’ demand,” Compal spokesman Chang Chih Ming said. “They want to diversify their investment (from China) to minimize risks.”

Compal had said in August that it plans to spend US$30 million on the initial phase of a manufacturing site in Vietnam.

“The US$30 million should be used by middle of next year, and we will decide the next step by evaluating the progress,” said Chang.

By Jason Folkmanis, Bloomberg News, posted Wednesday, October 10, 2007

Prudential of Britain has opened a consumer finance unit in Ho Chi Minh City as it tries to leverage a leading position in the Vietnamese insurance market.

Prudential, the second-biggest British insurer after Aviva, has a 42 percent share of the Vietnamese life insurance market as measured by total premium income at the end of 2006, the company said Tuesday.

Prudential Vietnam Finance will offer consumer loans and mortgages and may eventually offer credit cards. Retail sales in Vietnam are rising about 25 percent a year, according to a report last week from HSBC Holdings. Economic growth has averaged 7.8 percent over the past five years.

“They need to invest all these premiums they’ve generated, and the current options are pretty limited,” said Thomas O’Dore, president of the Vietnam unit based in Ho Chi Minh City, of Liberty Mutual Group, based in Massachusetts. “This is a logical extension of their business here, to generate the kind of returns their policyholders expect.”

Prudential got a Vietnamese government license last year to operate a finance company in the country. Société Générale, one of the largest French banks, has opened a unit in Vietnam to offer loans for cars, motorbikes and household goods, the State Bank of Vietnam said last month.

The move into consumer finance is a “logical extension” in a country where Prudential is the No. 1 life insurer and asset manager, the company’s chief executive, Mark Tucker, said in an interview in Ho Chi Minh City.

“We have a significant customer base here. We have excellent brand recognition,” he said.

Prudential’s expansion in Vietnam comes amid rising foreign interest in the insurance industry in the country, home to 85 million people. HSBC, the world’s second-largest bank after Citigroup, said last month that it would pay $255 million for a 10 percent stake in Bao Viet Insurance & Finance Group, the biggest government-owned insurer.

The previous day, AXA, the insurer based in Paris, said it had agreed to pay €54 million, or $76 million, for a 16.6 percent stake in Bao Minh Insurance, the second-biggest Vietnamese state-owned insurer.

The value of life insurance premiums in Vietnam rose 4 percent last year to almost 8.5 trillion dong, or $523 million, according to a June report in the Thoi Bao Kinh Te Saigon paper.

“Economic growth is having a very positive influence on the insurance sector,” said Pham Que Phong, general manager of Bao Minh’s property and engineering insurance division, in an Oct. 4 interview in Ho Chi Minh City. “Demand for insurance products is getting much higher.”