Large banks focus on corporate bonds

HA NOI (VNS)— The total value of corporate bonds sold during the first six months of this year has reached VND15 trillion (US$707.5 million), equivalent to 88 per cent of last year’s total, according to a report from the Bank for Investment and Development of Viet Nam (BIDV).

Property developer VIDP Group issued VND7.6 trillion ($358.4 million) in corporate bonds, mineral giant Vinacomin raised VND2.5 trillion ($117.9 million) and HCM City Infrastructure Investment (CII) issued VND1 trillion ($47.1 million) worth of bonds.

The BIDV report recorded small scale issuance of under VND100 billion ($4.7 million) from other companies. “Most of the bonds belonged to real estate firms,” the report said.

Corporate bonds were favoured by commercial banks. BIDV and Techcombank bought VND500 billion ($23.8 million) and VND3 trillion ($141.5 million) worth of bonds in VIDP Group, while all the bonds issued by CII, totalling VND1 trillion ($47.6 million), were sold to Vietcombank (VCB).

“Attractive yields have brought banks with large cash reserves to corporate bonds,” the report said. “Despite the gloomy economic situation that made it for bond issuance more difficult, large corporations are still alluring to investors.”

The supply of corporate bonds is expected to continue to rise as companies take advantage of low interest rates to raise capital. “Along with increasing supply, demand will be large, especially for bonds from reputable businesses,” the report said.

Bond yields for three to five-year terms range from 13-15 per cent.

Meanwhile, Government bonds were less attractive, according to Viet Dragon Securities Co. Government bonds during the first six months yielded about 6-9 per cent. Declining yields discouraged investors, especially banks.

In June and the beginning of this month, foreign investors sold Government bonds with a net value of VND7.2 trillion ($339.6 million). — VNS

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Myanmar set for stock exchange

Deputy Minister for Finance and Revenue, Maung Maung Thein confirmed on 15 July that Myanmar will begin implementing a stock exchange market this year. (MIZZIMA)

Earlier announcements state the stock exchange market will be established by 2015, but preparations are already under way.

“Earlier we planned to begin in 2015, but it would be too late. So, we are beginning this year,” says Maung Maung Thein.

The Central Bank of Myanmar is cooperating with the Daiwa Research Institute and Japan’s Tokyo Stock Exchange to establish Myanmar’s stock exchange. Later this month, Maung Maung Thein says there will be a demonstration on the operation of the stock exchange with the help of a Myanmar IT company.

According to Maung Maung Thein, the “Security Exchange Law” has been put forward to the Lower House in the current ongoing parliamentary sessions. Shortly after the bill has been approved, the stock exchange will be established.

Maung Maung Thein says a relevant committee has been formed in order to ensure a smooth launch for the stock exchange.

“Myanmar needs a huge market to attract financial investments,” says Maung Maung Thein. “Myanmar did not have that market. To establish that market [stock exchange], we have prepared for many years.”

Hla Maung, an economist, says, “It’ll be surprising if the stock exchange can be established in late this year. The sooner the better. But it is a financial market, so we need to have public companies and corporations that can sell shares. If not, the market will be weak and unsuccessful.”

Public companies that will sell shares in the stock exchange have to submit the company’s real status to the supervising committee. However, experts say this will pose a big challenge to existing Myanmar companies as they deal with problems about tax affairs.

Dr. Aung Thura, chief executive officer at Thura Swiss Company, who provides economic research services for public companies in Myanmar, recently told Mizzima, “According to Daiwa, new emerging companies such as KBZ and AGD will enter into the stock market rather than the current public companies when the stock exchange is established in Myanmar.”

Currently, only two public companies have registered at the Myanmar Security Exchange Center [MSEC]. An international economic researcher told Mizzima that if experts spread knowledge about the stock market among Myanmar citizens beforehand, it is likely that the early stage of the stock market will run smoothly.

The stock exchange will be located near Bandoola Garden, where Myawaddy Bank currently stands. The building formerly owned by the Finance and Revenue Ministry is due to be returned to them later this year.

JPMorgan lends $175 mil to Vietnam food maker Masan

The US’s largest bank, JP Morgan, has lent a subsidiary of food maker Masan Consumer US$175 million for three years to invest in its consumer business, news website VnExpress reported.

Masan Industrial earlier borrowed from the bank two years ago and is set to repay its matured debt of $108 million. The new loan carries a lower interest rate than the previous one, the company said without disclosing numbers. Of the loan, $150 million is guaranteed by the Multilateral Investment Guarantee Agency, a World Bank affiliate, making Masan the first Vietnamese private business to be backed by it.

To get the guarantee, a business has to go through risk assessment by MIGA based on project viability, the sector and its importance to the host country, financial viability, potential for earning export proceeds in freely usable currency, and environmental impacts.

Masan Consumer is the market leader in fish, soya, and chili sauces and the second largest producer of branded instant noodles in the country. It shares were up 1.7 percent to VND90,000 at the close on July 12. But the stock is down 11 percent for the year. This year the company targets 35-50 percent growth in after-tax revenues from VND2.781 trillion ($131.1 million) last year.

Vietnam should study Temasek model to boost state firms

Vietnam should consider following the model of Singapore’s Temasek Holdings Pte and Malaysia’s Khazanah Nasional Bhd. as it seeks ways to boost productivity at state-owned enterprises, McKinsey & Co.’s country head said. “It could be very interesting to look at successful stories that Malaysia and Singapore had,” Marco Breu, McKinsey’s chief executive officer in Vietnam, said in an interview. “They created this arms-length view between the government and the SOEs, this entity which then started managing them professionally with only business incentives in mind.”

Singapore created Temasek in 1974 to nurture the development of state corporations including the national phone company and airline. Khazanah was set up in 1993 with a similar mandate. Temasek managed S$215 billion ($169 billion) in investments as of March 31, while Khazanah’s net asset value reached 86.9 billion ringgit ($27 billion) at the end of 2012.

Vietnam is trying to raise competitiveness and efficiency at state companies as economic growth slows after the Communist Party said in 2011 that unprofitable government-controlled firms had become a burden. Prime Minister Nguyen Tan Dung approved a master plan in February to spur its companies to focus on core businesses and accelerate public share sales.

The Singapore and Malaysia models allowed the state investment firms to introduce common corporate governance practices and impose higher management standards. They have successively sold shares in former state companies and then reinvested the proceeds outside their home countries.

Role models

Temasek’s biggest holdings now include shares in Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company; DBS Group Holdings Ltd., the region’s biggest bank; U.K. lender Standard Chartered Plc; and Industrial & Commercial Bank of China Ltd., the nation’s largest bank.

Khazanah owns stakes in some of Malaysia’s biggest listed companies, including electricity producer Tenaga Nasional Bhd., mobile-phone company Axiata Group Bhd., lender CIMB Group Holdings Bhd. and hospital operator IHH Healthcare Bhd. The investment firm sold Proton Holdings Bhd., the national carmaker and owner of luxury sports-car maker Lotus, last year.

Breu also mentioned Kazakhstan’s Samruk-Kazyna, the sovereign wealth fund that controls assets accounting for about half of the country’s economic output, as a model.

Hidden inefficiencies

Vietnam’s sovereign credit rating was cut one step to B1 in December 2010 by Moody’s Investors Service, which cited concerns including “debt distress at Vietnam Shipbuilding Industry Group,” or Vinashin. Standard & Poor’s followed the same month, placing Vietnam three levels below investment grade.

The country targets 5.5 percent economic growth this year, which would be its first period of three straight years of growth below 6 percent since 1988, according to International Monetary Fund data. The government is trying to fix a banking sector weighed down by bad debt, which the central bank said was 7.8 percent of outstanding loans at the end of 2012.

Governments have difficulty giving state-owned companies more independence because they often serve as vehicles for state policies, Breu said.

“In SOEs, you will find a lot of hidden inefficiencies because they might not have been managed according to business principles,” Breu said in the July 2 interview. “Many times they function as a way to keep unemployment down.”

Without mechanisms to retrain workers, “it is very hard to all of a sudden say cut it 30, 40 percent,” he said. Breu declined to say whether McKinsey is advising Vietnam’s government, saying the company has a policy not to comment on its clients.

Small steps

Vietnam has taken small steps to replicate entities like Temasek with its State Capital Investment Corp., which was formed in 2006 to manage government shareholdings and operates under the Ministry of Finance, said Alan Pham, chief economist at VinaCapital Group. SCIC’s role should be expanded, he said.

A Temasek-like organization would have difficulty functioning within the fragmented power structure in Vietnam, said Jonathan Pincus, an economist with the Harvard Kennedy School’s Vietnam Program in Ho Chi Minh City.

“The problem is every level of government controls entities that are commercial in nature.” he said in a phone interview. “You have SCIC and the Ministry of Finance trying to be Temasek, but nobody wants to give them any assets.”

Vinashin, the state-run firm that had planned to build and export $1 billion of ships in 2009, almost collapsed in 2010 because it over-diversified and failed to manage its cash flow and debt properly, according to the Ministry of Transport.

Prime Minister Dung faced a call for a confidence vote in the National Assembly in late 2010 for his handling of Vinashin. Dung, who apologized for the shortcomings in a televised broadcast in October 2012, eventually faced the vote last month and passed with 67 percent support from lawmakers.

Market volatility

A stock market slump has slowed down Vietnam’s equitization process, Dominic Scriven, the CEO of Ho Chi Minh City-based fund manager Dragon Capital, said on behalf of the Capital Market Working Group at a conference last month.

The Ho Chi Minh City Stock Exchange’s benchmark VN-Index (VNINDEX) has lost 7.7 percent from this year’s June 7 high. The gauge has rallied 18 percent this year, at least 7 percentage points more than any other Southeast Asian benchmark tracked by Bloomberg.

Vietnam Airlines Co., the national carrier, has selected banks to manage an initial public offering, CEO Pham Ngoc Minh said April 9. He didn’t give a time frame for the sale.

One in five publicly traded companies may post losses this year, State Securities Commission Chairman Vu Bang said last month. Investors are awaiting the results of the government’s plans to resolve non-performing loans and restructure banks and state-owned enterprises, he said.

Productivity improvements

Productivity in manufacturing and services must improve by 50 percent for Vietnam’s economic growth to return to more than 6 percent, Breu said, citing a McKinsey report published last year. Vietnam can’t rely on the two other drivers of economic expansion – the labor force and urbanization – for growth, he said. South Korea achieved such productivity improvements during the 1970s, as did China more recently, he said.

“Unless you fundamentally change SOEs, reform these things, you will end up more at 4.5 percent to 5 percent growth,” Breu said.

Thanh Nien

Bank to join growing group from Taiwan

Taiwan-based Shanghai Commercial & Savings Bank Ltd plans to open a representative office in Cambodia, joining an increasing number of Taiwanese banks and garment industry investors in the Kingdom.

National Bank of Cambodia director-general Nguon Sokha said yesterday that the Taipei-based privately held bank had preliminary or “in-principle” approval on May 31.

Some banks establish representative offices to test the waters before making a decision on opening an actual branch. The point is to “gather information about the Cambodian economy . . . they observe the performance, [but it is] for their own use”, she said.

Shanghai Commercial & Savings would enter a crowded sector, behind other Taiwanese-based financial intuitions. Hua Nan Commercial Bank said last month that it would open a branch in Cambodia, hoping to capitalise on the country’s high number of Taiwanese investors and high interest rates.

Cambodia has “many Taiwanese companies, especially in the shoe and garment industry”, senior manager of the bank’s international banking department, Chris Lee, told the Post last month.

In September 2011, Taiwan’s Mega International Commercial Bank opened a local branch, followed by the March  2013 entry of Taiwan Cooperative Bank. That same month, Taiwan’s E Sun Commercial Bank announced plans to acquire a 70 per cent stake in Cambodia’s Union Commercial Bank for nearly $70 million.

Shanghai Commercial & Savings did not immediately respond to a request for comment. The bank’s website says that regulators in Taiwan approved the Cambodia office in January.

A share of Taiwanese investment in Cambodia flows into the garment industry. Taiwanese-owned Sabrina Garment factory, which supplies Nike, fired hundreds of workers on Saturday following violent protests and the arrest of unionists.

Taiwanese-owned garment factories Grand Twins International (Cambodia) Plc and TY Fashion are expected to become the first foreign-owned companies to list on Cambodia’s stock exchange.

By Anne Renzenbrink and May Kunmakara │13 June 2013│The Phnom Penh Post

Garment IPO may arrive in time for polls

After the listing of Taiwanese-owned garment company Grand Twins International (Cambodia) Plc on the Kingdom’s stock exchange was delayed indefinitely, its underwriter said yesterday that the firm hopes to list before the national elections in late July.

According to the underwriter, Phnom Penh Securities (PPS) Plc, negotiations between the company and the Securities Exchange Commission of Cambodia (SECC) over the initial public offering price are finished by now and “we hope [they can list] before the election…We still have a lot to do. We’ll try our best.”

In February, the Post reported that Grand Twins International said it intends to list on the Cambodia Securities Exchange (CSX) in March. PPS said then that the company would offer 12 million shares at $0.25 a share.

PPS said Grand Twins had “negotiated with the SECC about the IPO price, the listing price”, which was “higher than the SECC agreed”, adding that they have now agreed on a price, but declined revealing the amount.

According to an active market participant of the CSX, the existing status regarding Grand Twins International “is more of an administrative and compliance matter that the underwriter is trying to complete for documentation”.

“The timeline to list very much depends on the completion of the required documentation, if the documents are ready and can be approved by SECC before election, it will be listed before election, otherwise the listing will need to be postponed to after election,” the person familiar with the matter said.

Ming Ban Kosal, director-general of the SECC did not reply to an email yesterday.

The Post reported in March that state-owned fixed-line company Telecom Cambodia’s plan to join the CSX had been postponed indefinitely due to poor financial performance.

On Monday, Lou Kim Chhun, director general of Sihanoukville deep sea port, told the Post that the company is still working with an underwriter, SBI Phnom Penh Securities, on its IPO.

“We made a lot of progress on the project. Everything is going smoothly now,” he said, without offering a timeframe . “We have not set the exact time yet. But we will try our best to get it as fast as we can.”

By Anne Renzenbrink and May Kunmakara │5 June 2013│The Phnom Penh Post

Vietnam plans to extend stock trading hours to boost liquidity (Bloomberg)

Vietnam’s two main stock exchanges will extend trading hours to help boost liquidity and lure investors to a market that’s 13 times smaller than Singapore’s.

 The Ho Chi Minh City Stock Exchange, the country’s main bourse, will extend afternoon trading hours by 45 minutes to end at 3 p.m. local time, Chairman Tran Dac Sinh said in a telephone interview today. Trading hours for the Hanoi Stock Exchange will also be extended by 45 minutes for the afternoon session, Deputy General Director Nguyen Thi Hoang Lan said by phone.

“Longer trading hours will allow institutional and professional traders to spread out trading more,” said Attila Vajda, a Ho Chi Minh City-based analyst at ACB Securities Co.“It will be slightly easier to beat the market, especially if volumes are sizable.”

The VN Index (VNINDEX) has rallied 27 percent this year, the best performer among benchmark gauges in Southeast Asia, as the country’s central bank cut interest rates last month for an eighth time since the start of 2012 and the government stepped up efforts to tackle banks’ bad loans.

The nation’s stocks are valued at $45.6 billion, compared with $595.8 billion in Singapore, the region’s largest market.

The new trading hours for the Ho Chi Minh City bourse may start in the third quarter, while July 8 is targeted for the Hanoi exchange, according to the exchanges’ officials. There are no changes in trading hours for the morning sessions.

The plan to extend trading hours for the Ho Chi Minh City Stock Exchange was earlier reported by Vietstock, an online financial news service.

About $51 million of securities traded daily on average this year on the Ho Chi Minh City Stock Exchange, the country’s main bourse, compared with $1.34 billion for Singapore, according to data compiled by Bloomberg.

The State Securities Commission has agreed in principle to the trading hours extension, Nguyen Son, head of market development at the regulator, said today. The exchanges have started pilot programs to test the system, he said.