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Domestic capital too costly, businesses seeking foreign capital
The overly high interest rates in the domestic capital market, caused by the tightened monetary policies, have prompted businesses to seek capital from foreign sources.
Foreign sources offer huge capital, reasonable interest rates
In May 2011, the fact that Hoang Anh Gia Lai Group successfully issued 90 million bonds on the international market stirred up the public. The bonds with the fixed interest rates of 9,875 percent, will be matured after five years. Credit Suisse was the only guarantor for the bond issuance.
Explaining the decision to seek foreign capital, Doan Nguyen Duc, President of Hoang Anh Gia Lai, said that the domestic capital is too costly, and he has to seek cheaper capital sources.
Also according to Duc, Hoang Anh Gia Lai’s bonds were issued in accordance with the New York law, which allows enterprises to buy back the bonds within three years since the day of issuance.
Seeking foreign resources is also the way that many banks are following. A lot of domestic banks have called on foreign investors to purchase stakes in order to increase their chartered capital. Calling for foreign investment has been described as a wise move for now, when the stock market seems to be “paralyzed” which does not allow banks to seek more capital.
An Binh Bank two times successfully sold stakes to foreign investors to increase its chartered capital. Especially, in 2008, when the global economy fell into recession, An Binh bank still could sell stakes to foreign partners at high prices.
Maybank, Malaysian biggest bank, purchased 15 percent of the total shares of An Binh Bank at the price which was five times higher than the face value, worth 2138 billion dong.
In mid 2011, the Malaysian bank once again affirmed its commitment to make long term investment in Vietnam, announcing the plan to purchase five more percent of stakes in order to obtain 20 percent of An Binh Bank’s stakes, the maximum allowed ownership ratio
An Binh Bank has also got 60 billion dong more in capital from the International Financial Corporation (IFC), an arm of the World Bank. IFC has made the investment deal in An Binh Bank to become a shareholder with 10 percent of chartered capital.
In 2010, while banks struggled to mobilize domestic capital to increase their chartered capital to 3 trillion dong as required by the State Bank of Vietnam, some banks successfully sought enough capital prior to December 31, 2010, the deadline by selling stakes to foreign partners.
OCB Bank, for example, sold stakes to French BNP Parisbas, to increase its chartered capital from 2600 billion dong to 3000 billion dong. Meanwhile, Southern Bank has got the approval on increasing capital from 3049 billion dong to 3212 billion dong by selling stakes to Singaporean UOB
VIB and Mekong Bank have also reportedly found several hundreds of capital more by selling stakes to some big financial institutions from Australia and Singapore.
Information transparency is the key
In principle, the international capital market is very big, where all businesses can seek capital. However, it is not easy to mobilize capital in the market
Analysts said that the biggest anxiety of foreign investors, who plan long term investment, is the lack of information transparency.
Therefore, in order to successfully call for foreign investment, domestic enterprises need to create confidence among foreign investors. Investors have the right to know all the information relating to enterprises, both good and bad, so that they can weigh pros and cons before making investment decisions.
Vietnamese banks still can sell their stakes to foreign partners, though it is now the difficult period for Vietnamese bankers. Therefore, experts say foreign investors are always interested in the opportunities to make investment in Vietnamese businesses.
Le Khac
vietnamnet
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