Vietnam sees share offerings booming

The State Securities Commission (SSC) this year has approved the largest ever number of share offerings by listed firms, sparking concerns of oversupply.

SSC as of the end of July had permitted enterprises issue around VND61 trillion worth of shares while it was only VND19.3 trillion in the whole 2009, said Bui Hoang Hai, deputy director of SSC’s Issuance Management Department.

Hai told a seminar in Hanoi last week that SSC had approved nearly 500 share issue applications this year.

In the first six months of 2010 alone, SSC had allowed listed organizations to issue VND18.6 trillion worth of shares to the public, VND1.1 trillion for their staffs and VND25 trillion for strategic shareholders. In addition, there were VND717 billion of shares offered via auctions at the stock exchanges, VND50 billion of bonus shares and VND86 billion worth of dividend stocks.

Hai said that many enterprises are seeking to offer huge amounts of shares this year as they failed to do so last year due to poor profits. Meanwhile, commercial banks also want to offer shares to increase capital given new regulations requiring them to spur capital to at least VND3 trillion each or get disbanded.

However, due to the lack of transparency on the part of listed firms, stock investors may face risks.

The quality of information released by listed companied in Vietnam is still poor. Most enterprises have no specific and long-term issuance strategies and announce information barely at compulsory requirements, Hai said.

“Some information is not trustworthy and may cause misunderstanding,” Hai said. There are enterprises providing information of business results or share prices on the basis of non-standard calculations. “Few enterprises have responsibility for what they say in the announcements,” he stressed.

While some enterprises release information regularly, others have no official websites and rarely send notices to stock watchdogs. “I think that many investors cannot receive the information either,” Hai said.

Hai also noted that while share issuance in the world aims to attract capital from new investors, listed enterprises in Vietnam primarily offer shares to existing shareholders.

David Gerald, president of the Singapore Securities Investors Association, advised investors at the seminar to study the stock market thoroughly.

“Don’t join the market if you have no knowledge. You have to check the issuing companies,” he said.

“We have to create an equity market where investors have responsibilities, knowledge and bear the blame for their decisions,” Gerald added.

Other experts said transparent information and proper release via the media could help Vietnamese enterprises maximize the value in their initial public offerings (IPO).

According to SSC, Vietnam’s stock market capitalization as of the end of August reached VND650 trillion, or US$33.5 billion, equivalent to one-third of the country’s gross domestic product. – Saigon times

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