State firms' IPOs may see further delays

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Workers at a garment factory belonging to the Vietnam National Textile and Garment Group (Vinatex). The corporation says it is in talks to identify a strategic foreign partner for its proposed IPO in July.

Some large public enterprises are planning to make much-delayed initial public offerings this year, but there is skepticism about whether they will happen this time around either.

A state owned enterprise (SOE) restructure plan recently approved by the government envisages Vietnam Airlines making an IPO this year and offloading its stakes in 10 businesses from now through 2015.

Following the IPO, the government will own 65-75 percent of the airline, which has a chartered capital of VND8.9 trillion ($423.8 million).

It will continue to fully own Vietnam Airlines Engineering Company and more than 50 percent stakes in 14 companies, including budget carrier Jetstar Pacific.

The government gave approval for the airline's IPO as long as 2008, but the plan was shelved because of the economic and stock market downturns.

Construction materials producer Viglacera plans an IPO not later than in September, and it will sell some 20 percent of its equity.

The Vietnam National Textile and Garment Group, which planned to equitize last year, is now scheduled to do so this year.

Vu Duc Giang, chairman of the group, said: "We are in the final preparation stage for the IPO. The IPO is expected to happen on July 1, 2013."

It is in talks to identify a strategic foreign partner. Some Japanese investors have expressed interests in investing in the group, Giang said.

Economist Bui Kien Thanh is one of the skeptics. He said the IPOs can only be sucessfully made when the stock market rebounds, the market becomes more transparent, and the ratio that SOEs are allowed to sell is increased.

He thought the IPOs would be delayed further "as the market has not yet showed signs of recovery, and the equity allowed to be sold to investors is too small."

Besides neither the government nor SOEs are too determined to accelerate SOE privatization, he said.

The bosses at some SOEs are reluctant to equitize because it would mean a dilution of their power, he said.


No stock market recover on the horizon: experts

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Investors are not keen on buying SOE shares because of the low cap beyond which they cannot buy, he pointed out, saying the government should allow foreign and private investors to buy bigger stakes in privatizing companies.

Another problem now is that investors could lose confidence in the IPOs after the long delays.

The State Securities Commission is considering allowing non-voting ownership exceeding 49 percent for foreign investors and planning a pilot program for that. The current cap is 49 percent, and just 30 percent for banks.

Fear of transparency

An economist, who spoke on the condition of anonymit,y said the privatization of state companies in Vietnam has slowed down since 2006.

"The decline in the stock market was certainly a reason for the delays, but I think there must have been some other reasons like the reluctance of SOE executives, their fear of having to bring in transparency, and apprehension among governing agencies about losing control," he said.

"The goal of selling shares in state companies is not to earn money, but to make them more effective," he argued. "The stock market going up or down should not be a factor affecting their privatization."

"So the IPO of many SOEs will not be succesfully made this year if the issues are not resolved," he said.

Nguyen Son, head of the State Securities Commission's Market Development Department, said the equitization of SOEs depends on many factors like demand in the stock market, so many IPOs were not made last year.

But the market has improved this year, he said.

"If the market continues to strengthen, the IPO of big SOEs like Vietnam Airline and Vinatex will attract many foreign and domestic investors."

Not to grow stably

The Ho Chi Minh Stock Exchange's VN Index stood at 479.79 points on Jan. 31, rising 66.06 points, or 16 percent in January.


Vietnam will unveil a plan to overhaul 52 state-owned groups by June and lay out steps to sell stakes or unprofitable assets in most of the companies, seeking to curb bad debt that has hurt economic growth, Bloomberg quoted Deputy Minister of Finance Truong Chi Trung as saying.

The government plans to sell all non-essential units by the end of 2015, and will retain just 50 percent to 75 percent in most of its companies, Trung said.

"After restructuring, we will retain 100 percent in very few state-owned enterprises," Trung said. "They will be enterprises in some limited number of areas that others cannot do, such as public services, or national defense and security, and some very few companies in key areas which are the foundation of the economy. Other enterprises will be subjected to government ownership of between 50 to 75 percent."

Le Tham Duong of the Banking University of Ho Chi Minh City said the rise would not be sustained this year since the economy and companies' health have yet to show signs of recovery.

The government has set a GDP growth target of 5.5 percent for this year. The economy grew at 5.03 percent in 2012, the lowest rate in 13 years.

Nguyen Tri Hieu, a director of ABBank, said foreign investments flowing into the country are not huge and are coming only from investors familiar with the business environment.

Others are still waiting and watching, he said. Some overseas institutions he spoke to were concerned that the Vietnamese banking system continues to be plagued by "massive bad debts and mismanagement."

The housing-market slump has also put off international investors, he said.

It is hard to predict foreign investment in the stock market since it depends on how the government tackles these issues, he added.

The director of a securities company in Hanoi said the shares of companies producing essential consumer goods like food and beverages will be in demand this year as they have not been affected much by the economic slowdown.

In fact, shares in this sector rose 28 percent and 29 percent in 2011 and 2012, he said.

Investors should buy shares of property firms and banks if they want to invest in the fields for medium- and long-term since banks' bad debts will not be solved just in 2013, he said.

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