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Foreign capital keeps flowing to convertible bonds
Foreign investment institutions have reportedly been buying large offerings of convertible bonds, which show that Vietnam’s macroeconomy is still bright in the eyes of foreign investors.
Vietnamese Hoang Anh Gia Lai (HAG) Group and Northbrooks Investments (Mauritius) Pte Ltd, a unit belonging to Singaporean Temasek Holdings Group, have signed a contract under which Temasek purchased 1,100 billion dong worth of HAG’s convertible bonds at a conversion price of 67,375 dong per share after one year.
HAG shares were trading at 71,000 dong per share on August 24.
Analysts say that a big investment institution like Temasek will help HAG polish its image in the capital markets, because it is not easy for Vietnamese enterprises to attract such a large investor.
Vo Truong Son, Deputy General Director of HAG, said that it took HAG and Temasek two months to reach an agreement on the convertible bond sale, counting the time Temasek began working with HAG to the time when the agreement was completed. Prior to that, Temasek spent its time quietly researching HAG.
“They are interested in all aspects of HAG, but the most important thing they are interested in is the legitimacy and the feasibility of HAG’s projects,” Son said.
In fact, HAG has been attracting many professional investment institutions, especially foreign investment funds. However, Temasek is a high-class investment institution. According to Dau tu newspaper, the contract on convertible bond sale signed by Temasek and HAG includes 50 pages, not including appendix.
At the moment, the HCM City Infrastructure Investment Joint Stock Company (CII) and its “secret” partners are still negotiating the foreign partner’s purchase of CII convertible bonds. Sources said that the sales price would not be lower than 43,500 dong per share, and the total value of bonds to be issued is about 20-25 million dollar.
CII shares were trading at 33,000 dong per share on August 24.
Well-informed circles said the foreign partner of CII is one of the US’s five leading banks.
Analysts say foreign investment institutions have made a wise move to purchase convertible bonds issued by Vietnamese enterprises. At the moment, prices for Vietnamese company shares remain low in comparison with the high growth rate of Vietnam’s economy. Additionally, there is relatively little risk in investing in convertible bonds.
Analysts believe CII and HAG are both capable of generating stable cash flows for investors. CII’s strengths are in infrastructure projects, while HAG’s strengths are in land, mining, and rubber projects.
If the stock market index improves, the prices for these shares will increase sharply. In case the market index decreases, these enterprises will still be able to make money to pay bondholders. If CII’s partner does not want to convert the bonds into shares, it will be able to earn an interest rate of four percent, which is higher than the deposit interest rate in the US. Meanwhile, Temasek will get the bond interest rate, calculated by the average deposit interest rate offered by commercial banks plus three percent.
Nam Long Company recently attracted $9.1 million worth of investment capital from VAF, a fund that belongs to Mekong Capital.
Analysts believe that the successful issuance of convertible bonds to foreign institutions shows that Vietnam’s macroeconomy is still bright in the eyes of foreign investors.
vietnamnet, Dau tu
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