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Market soars following Tet holiday

Update: February, 06/2012 - 10:02

by Thien Ly

The local stock market rose on the days after Tet, signalling positive changes in the securities investment area for the new year.

Minister of Finance Vuong Dinh Hue said he believed that the local stock exchange this year would overcome difficulties to go further smoothly.

The finance ministry considered the stock market to be an important channel to attract medium – and long-term capital sources for the national economy. It was also an ‘air-gauge' to measure the macro-economy, Hue said, adding that establishing and developing the stock market was really crucial.

To do this, the ministry would ask its authorised agencies and the State Securities Commission (SSC) to seriously implement a stock-market development strategy, with focus given to the restructuring of the local securities market and securities companies, he said.

The ministry has also submitted a draft of the Prime Minister's instruction on stepping up the operation and strengthening management over the local stock market for approval.

The Government would continue implementing effective fiscal and monetary policies and restructuring of the economy, both of which were expected to help the country's macro-economy, and in turn, contributing to the development of the local stock market.

Drastic measures would also be done to ensure that the local stock market run in a modern, smooth, open and transparent way.

Tran Dac Sinh, chairman of the HCM City Stock Exchange (HoSE), said the stock market was still an attractive investment channel.

The macro-economy has shown positive signals, with the Consumer Price Index (CPI) growth slowing and bank interest rates expected to fall in the coming time.

Experts predict that money from various sources would be injected into the stock exchange because securities investment is based on confidence in the future.

Bad debts still at a high

The ratio of bad debts at a number of credit institutions in HCM City last year was still high, sharply rising compared to the previous year.

The central bank's HCM City branch reports that the fifth-group debts, seen as the worst non-performing loans, accounted for a high portion of overall bad debts among local lenders.

A large part of the bad debts were from loans given to the property sector. A local bank even reported that the value of its realty loans shot up to 70 per cent of total outstanding loans as of the end of last year.

The Viet Nam Bank for Agriculture and Rural Development, or Agribank, has the highest ratio of bad debts, at over 15 per cent out of the four state-owned commercial banks. Meanwhile, the average ratio of non-performing loans of commercial joint stock banks in the city was 2.59 per cent.

In addition, finance companies in the city suffered a 16.97 per cent ratio of bad debts on non-performing loans, while that of finance leasing ones was 23.31 per cent, as of the end of November last year.

The city's credit institutions reported that their total bad debts in the primary market servicing residents and organisations was 3.85 per cent at the end of November.

The figures from the central bank's HCM City branch pointed out that most banks enjoying low profits or mired in losses or high bad debts rates were due to having been involved in real estate-related loans.

The central bank affirmed that credit activities of the banking system this year would continue facing unexpected risks as uncertainties in the property market and local business activity remained unpredictable.

Vu Viet Ngoan, chairman of the National Financial Supervisory Committee, said that the biggest challenges facing the local financial market this year were liquidity and bad debts, which would continue creating heavy pressure on financial organisations' activities this year.

This has occurred because fiscal policy and monetary policy has been and will continue to be tight for a long time, thus straining the liquidity of the economy, including the banking system.

Nguyen Minh Phong of the Ha Noi Social and Economic Development Research Institute, said that because the Government would continue to pursue tight monetary policy seriously to lower the country's inflation rate to one digit, there would be more difficulties for both banks and firms in mobilising capital.

Given the situation, if financial investments as well as loans are not controlled well, more risks including bad debts, weak liquidity and corruption will arise, according to Phong.

Experts, however, said that, in addition to obstacles, lenders and financial companies this year would have good opportunities related to their finance activities.

The exchange market began showing positive changes with the exchange rate between the dong and the US dollar established, balance of international payments improved, and foreign currency and gold trading activities controlled effectively.

Japanese firms seek ties

The Vietnamese market is witnessing a trend of many Japanese companies trying to become strategic partners of Vietnamese enterprises. By doing this, they expect to integrate into Viet Nam more easily.

Early this year, Ezaki Glico Co Ltd, a Japanese confectionery company headquartered in Osaka, signed an agreement with Kinh Do Corporation (KDC) to buy 14 million shares,or a 10 per cent stake in the local enterprises. This move is considered to be a preparatory step for Ezaki Glico to penetrate into the Vietnamese market.

According to KDC, with this share purchase, KDC and Glico have co-operation plans to distribute luxury products of Glico in Viet Nam through KDC's distribution network and marketing team to develop a confectionery business here.

Meanwhile, with experiences and products of Glico, KDC expects to bring its confectionery business to a higher professional level.

Also in January, Mizuho Corporate Bank (MHCB), an affiliate of Japan's Mizuho Financial Group, bought a 15-per cent stake in the Joint Stock Commercial Bank for Foreign Trade of Viet Nam, or Vietcombank.

Under a contract signed in Ha Noi on Sept. 30, the transaction, worth US$567.3 million, will be realized in the first quarter of 2012, following approval by relevant agencies.

MHCB has brought 347.6 million new shares issued by Vietcombank at a price of VND34,000 per share. The bank will appoint a representative to serve as a member of the Vietcombank board of directors.

MHCB has become Vietcombank's only strategic partner and will provide technical assistance services for the Vietnamese bank's operations.

Many other Japanese companies have also become strategic partners of Vietnamese companies involved in various industries.

As a result, Japanese now hold a 25 per cent stake in the Vietnamese Company Nutifood; a 48 per cent stake in the Sai Gon Paper Corporation; a 57 per cent stake in the International Food Joint Stock Company; and a 95 per cent stake of the Vietnamese producers of diapers and sanitary products, Diana Viet Nam.

Independent market watchdogs predicted that the list of Japanese companies becoming partners of Vietnamese enterprises would be longer this year. Most of these Japanese companies tend to invest in Vietnamese companies that have the same business as theirs.

Experts said that this time was very good for Japanese companies to invest in Vietnamese enterprises since the latter were meeting difficulties particularly in the financial area. In addition, Viet Nam's interest rate is several times higher than that of Japan. More importantly, Vietnamese shares are very inexpensive now.

Meanwhile, the Japanese market has already been saturated with Japanese yen appreciating so Japanese investors have to seek new markets like Viet Nam.

By entering into a partnership with Vietnamese companies, Japanese firms would not only cut costs and time to penetrate the local market but they also can ensure the effectiveness of their penetration.

As for Vietnamese companies, although their shares are paid by Japanese enterprises at a very high level, they have still proved to very cautious about commercial affairs of this kind.

Some are concerned about the partners' possibility of dominating their market shares later, particularly as they do not have sufficient information about the partners' experiences and investment purposes.

However, many Vietnamese companies have no choice and must sell their shares to foreigners because they are in serious shortage of capital for development, and they also want to get access to international business standards. — VNS

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