BIDV listing to boost Vietnam stock market liquidity

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Traders work on the floor of the Ho Chi Minh City Stock Exchange in Ho Chi Minh City, Vietnam

Bank for Investment and Development of Vietnam, the nation's second-largest lender by assets, will begin trading on the local exchange this week as regulators seek to boost stock-market liquidity and make banks more transparent.

BIDV, as the state-run lender is known, will list 2.81 billion shares on the Ho Chi Minh City Stock Exchange on Jan. 24 with an initial price of 18,700 dong each, Tran Phuong, a senior executive vice president, said in an interview today. The company won't be raising any new capital.

BIDV's listing may help boost the size and liquidity of Vietnam's $49 billion stock market, the best performer in Southeast Asia last year, said ACB Securities Co. The country is trying to mend a banking system burdened with the region's highest level of bad debt, according to Fitch Ratings.

"The listing will add more depth to the market and broaden the choices for investors," said Attila Vajda, the head of institutional sales at ACB Securities. BIDV's entry on the exchange "will add some transparency," he said.

The benchmark VN Index rose 22 percent in 2013 as inflation eased, the government purchased bad loans from banks and investors speculated policy makers will reduce restrictions on foreign investors. The gauge climbed for a 12th day today, gaining 2.4 percent to the highest level since November 2009 as of 9:50 a.m. local time.

Exchange volumes

"The market has been rallying thanks to the improvement on the macro environment and this is a suitable time for listing," Phuong said.

Low trading volumes have discouraged some investors from buying Vietnam stocks. The daily average value of shares changing hands on the Ho Chi Minh exchange in the year through Jan. 17 was about 1.1 trillion dong ($52.2 million), data compiled by Bloomberg show. That compares with about $15 billion on China's Shanghai Stock Exchange.

BIDV sold a three percent stake in an initial public offering December 2011 and had planned to begin trading June 2012. The plan was delayed after a slide in the VN Index.

In 2013, BIDV posted a pretax profit of about 5.2 trillion dong and is targeting at least 6 trillion dong this year, said Phuong. The bank's bad debt ratio will be curbed at maximum of 2.6 percent, compared with the estimated figure of 2.3 percent in 2013, he said. BIDV plans a dividend payout ratio of 8 percent to 9 percent in 2014, Phuong said.

Bad debts

The listing would raise the number of publicly-traded banks on the benchmark VN Index to six and to nine nationally. Vietnam lenders have the highest rate of bad debt among the six Southeast Asian countries covered by Fitch Ratings.

Policy makers set up an asset-management company to buy soured loans from banks in July. VAMC, as the entity is known, bought 39 trillion dong of bad debt from 35 lenders last year. The asset management company may purchase debts of as much as 150 trillion dong this year, central bank Governor Nguyen Van Binh said in December.

Vietnam's economy grew 5.42 percent last year, faster than the 5.25 percent pace in 2012. The government predicts economic growth will accelerate to 5.8 percent in 2014.

Exports jumped 15 percent last year from the previous year and the nation received $11.5 billion in disbursed foreign direct investment, a 10 percent increase from 2012, according to the General Statistics Office. Pledged FDI was $21.6 billion in 2013, a gain of 55 percent from a year earlier.

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