Vietnam Overseas

Global banking giant HSBC said Thursday it would up its stake in Vietnam’s Techcombank, one of the largest private banks in the communist country, to 20%.

HSBC said in a statement it would become the first foreign bank to hold a 20% stake in a Vietnamese bank, if the 77.1 million dollar deal goes ahead. HSBC currently owns 14.4% of Techcombank.

The London and Hong Kong-listed firm said it expected to finish the deal by September 5, which comes after Vietnam’s government and central bank gave the green light in the past few months.

Viet Nam, a World Trade Organisation member since early 2007, has agreed to open up its banking sector but maintains caps on foreign ownership. Foreign banks have complained the market is not opening fast enough.

HSBC, which is targeting emerging markets as part of its expansion strategy, also owns part of leading Vietnamese insurance company Bao Viet Holdings.

Techcombank, founded in 1993, is one of the largest joint stocks banks in Viet Nam, with assets of almost 2.5 billion dollars at the end of last year, according to the bank’s website. (AFP)

Banks are now facing big difficulties due to the central bank’s tightened monetary policies. However, investors are still being advised to inject money in bank shares as the banking sector still has great potentials in the long term.

BVSC thinks that Vietcombank shares are the most lucrative investment item of the group at this moment.

Bao Viet Securities Company (BVSC) has released a report with detailed analysis about the banking sector and the investment opportunities with bank shares. The company believes that the share prices of some banks which have great potentials for development have become very reasonable for long-term investments.

BVSC, after showing the indices about the business scale and financial capability, market share, network and development strategies, risks in operation and development potentials, made the conclusion that it is now the right time to make investment in Vietnam’s banks.

However, the investment levels should be different for different groups of banks. According to BVSC, there are four main groups of banks in Vietnam’s market.

Group 1: the Bank for Agriculture and Rural Development (Agribank), Vietnam Industrial Commercial Bank (VietinBank), the Bank for Investment and Development of Vietnam (BIDV) and the Vietnam Bank for Foreign Trade (Vietcombank). BIDV and VietinBank are drawing up equitization plans, while Vietcombank has issued shares to the public. BVSC thinks that Vietcombank shares are the most lucrative investment item of the group at this moment.

Group 1 comprises the most powerful banks in Vietnam with big total assets and operation networks. They always record stable growth and control the market in main services.

BVSC suggests investing in Vietcombank shares at the current price levels.

Group 2 is Asia Commercial Bank (ACB), Sacombank and Techcombank. These are the biggest joint-stock banks in Vietnam, and maintain stable growth rates in total assets, turnover and profit and low risks. The banks have the support of strategic partners, among the world’s big financial groups.

BVSC suggests investing in the shares of the banks listed in Group 2 at the current price levels.

Group 3 comprises East Asia Bank (EAB), Military Bank (MB), Eximbank and VIB Bank. The banks in this group have total assets, turnover and profit at medium level among joint stock banks. Some of the banks in the group have sold stakes to foreign strategic partners, while some are seeking foreign strategic partners.

The suggestion BVSC has made is to make investments in the shares of the banks in Group 3 at the current price levels.

Group 4 is VP Bank, Habubank, An Binh Bank and SeABank. BVSC thinks that investors should not make investments in the banks’ shares at this moment.

It is because BVSC thinks that this group of banks has total assets lower than the average level of joint stock banks. Their total assets, turnover and profit have been increasing rapidly but not stably, while profitability is still low and risks are high. Three members of the group, VP Bank, Habubank and An Binh Bank, have foreign strategic partners.

Vietnam privatized 30 state-owned enterprises (SOEs) out of the total 62 SOEs rearranged in the first six months of 2008, said Pham Viet Muon, deputy head of the Steering Committee for Enterprises Reform and Development.

The privatization process goes slowly at snail pace, but it is suitable in the current socio-economic situation, he said.

In 2006, the government planned to privatize more than 1,500 SOEs by 2010.

However, the stock market slumped recently and purchasing power weakened. Even if we had issued shares, no one would have bought them, he said.

“Trying to pursue the original target is impractical. The government will adopt measures to accelerate the process.”

Vietnam has privatized total 3,786 SOEs so far.

The country now has 1,720 state wholly owned companies, including seven groups, 86 corporations, 1,099 independent state-owned companies. In addition, there are four state-owned commercial banks.

Six state corporations and one state-owned bank have undergone privatization.

The state-owned groups and corporations own 100% registered capital in 524 affiliate companies, hold more than 50% stakes in 738 privatized companies and less than 50% stake in 672 companies.

These groups and corporations play key role in the economy, helping the government to regulate the macro economy. In 2007, their goods and services production accounted for 40% of GDP.

To implement the government’s anti-inflation measures, they have suspended 609 projects worth VND34.2 trillion (US$2.14 billion) so far this year.

Muon said that most of the 3,786 privatized companies, especially those the state holds controlling stake, still retained their old management mechanism.

7 March 2008

The Hochiminh Stock Exchange has signed a Memorandum of Understanding (MoU) with Deutsche Börse Group on Friday in Frankfurt. The partners want to co-operate in order to facilitate the development of the securities markets in Vietnam and Germany and will explore bilateral business opportunities.

As a first step, the parties have agreed to launch training measures in order to foster the understanding of the financial markets in Vietnam, other Asian regions and Germany. Under the terms of the MoU, the parties will enter into detailed discussions and analyze the business possibilities for example of cross-border trading and listing and creating indices.

“We are very pleased about our partnership with the Hochiminh Stock Exchange.

Our agreement marks an important step in further strengthening the already mutually beneficial relations between the German and Vietnamese capital markets”, said Reto Francioni, Chief Executive Officer of Deutsche Börse.

“The agreed cooperation between Deutsche Börse and Hochiminh Stock Exchange will foster the friendly ties between the two exchanges which have been established over the past few years,” said Nguyen Doan Hung, chairman of the Hochiminh Stock Exchange.