Fund raising via stock markets proves difficult

The amount of capital that companies raised via the stock market in the year’s first half was trivial and barely increased from the year-earlier period due to the gloomy economic outlook.

Only eight companies sought to auction shares on the southern exchange in the January-June period, offering 145.9 million shares but selling only 32 million shares worth VND396 billion, according to the Hochiminh Stock Exchange.

The situation was similar compared to the first half last year when 11 companies offered 139 million shares via the southern bourse and sold only 22.1 million shares worth VND310 billion.

Investor appetite for risks seemed to be stronger on the Hanoi Stock Exchange.

In this year’s first half, there were five shares auctions on the northern bourse with 71.1 million shares on offer, and investors snapped up 43.6 million shares worth VND451 billion. However, the auction of Vietnam Steel Corporation alone accounted for the lion’s share, with up to 39.15 million shares finding buyers compared to 66 million shares on offer.

Among Asian stock indexes, the HNX-Index of the northern bourse fared the worst, falling as much as 34.9% in the first six months of this year, followed by the VN-Index of the southern bourse with a fall of 10.75%. Experts said the prospect for Vietnam’s stock market was still dim in the near term.

Viet Dragon Securities Co. in a report for July said investors would continue to unwind their positions to repay bank loans, thus exerting pressure on stock prices in the coming time.

According to a new draft circular of the central bank on the safety ratio of banks, credit institutions can lend a maximum of 3% of their equities for stock investment, said Viet Dragon Securities Co. Given the current total equity of banks at VND233.6 trillion, credits for stock investment should total only some VND7 trillion.

However, current regulations allow a bank to lend as much as 20% of its chartered capital to stock investors, meaning the banking industry could extend up to VND42 trillion in credits for stock investment. If the draft circular is approved, credits from banks for the stock market must be downsized by six times, and equal to just one-third of the real amount of loans for portfolio investment now.

Therefore, Viet Dragon Securities Co. predicts the stock market cannot strongly increase in the near future. – SGT

Tags: vietnam stock, Vietnam stock market, VNindex