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Banks rely on foreign partners to raise capital
One of the ways in which banks are planning to increase their charter capital this year is to have their strategic partners acquire a greater stake – from the current 10 to 20 per cent.
However, it is not very clear if this move, aimed primarily at meeting new minimum charter capital requirements, will work for everyone.
Most of the applications that have been made in this regard are yet to be approved, and experts say the general gloomy economic outlook would make many foreign banks more cautious with their investments.
The Orient Joint Stock Commercial Bank (OCB) is awaiting approval from the Government to continue selling its shares to its current strategic partner – France's BNP Paribas, in order to increase the latter's stake to 20 per cent.
Doing this will increase OCB's charter capital to the minimum VND3trillion (US$142.9 million) required by the State Bank of Viet Nam. The deadline for all banks to meet the minimum charter capital requirement is the end of this year.
The Southern Joint Stock Commercial Bank plans to increase its charter capital to VND4 trillion this year. It will issue more shares and offer them to its stratetgic shareholder, Singapore's United Overseas Bank (UOB), to raise latter's stake from the current 15 per cent to 20 per cent of its charter capital.
To make this happen, UOB will buy over 16.34 million shares for VND163.479 billion.
The Southern Bank had already submitted an application to the central bank last year to increase its charter capital, but it is yet to receive a reply.
After selling 15 per cent of its shares to Singapore's Temasek Holding, the Mekong Joint Stock Commercial Bank has raised its charter capital to VND3 trillion.
It has also reached an agreement with its foreign partner to expand the latter's stake to 20 per cent. However, this plan has not been approved yet by the Government.
To date, only three banks have had their applications to allow strategic investors increase their stake: Techcombank, which sold a 20 per cent stake to the Hong Kong Shanghai Banking Corporation (HSBC); the ABBank, which sold 20 per cent to Malaysia's Malayan Banking Berhad (Maybank); and the SeaABank which has made a similar sale to Europe's Societe Generale Group.
A banking official said Viet Nam's performances in the financial sector in recent years has been impressive, so many foreign investors were ready to spend money by acquiring strategic stakes in Vietnamese banks.
The State-run Viet Nam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) recently sold 10 per cent of its shares to the International Financial Corporation (IFC) and is going to sell another 15 per cent to Canada-based Bank of Nova Scotia.
At present, more than 10 foreign banks have become strategic shareholders of domestic banks.
The official also said that foreign investors were likely to be more careful than in previous years because recent economic changes in the world have not been very positive.
Wood industry
Viet Nam's wood processing industry is in an unusual situation.
While enterprises involved in processing and exporting wood products have to import large volumes of raw materials at high prices, those involved in plantations have to sell timber at very cheap rates.
Vu Long of the Viet Nam Wood and Forestry Association (Vifores) said domestic prices of acacia wood materials ranged between VND0.8 and 1.3 million per cubic meter, while Vietnamese wood processors had to import foreign acacia wood materials at VND3 million per cubic meter.
The result was that although the domestic wood export industry expected to earn US$4 billion this year, it would have to spend more than US$1 billion importing materials.
Vifores General Secretary Nguyen Ton Quyen also said that only 30 per cent of the Vietnamese sawn timber was used for making export products. For the remaining 70 per cent, the materials were imported at high prices, he said.
The high import prices meant high production costs and low net profit for furniture that was exported, Quyen said, putting the figure at just 2 per cent of an exporter's sales turnover.
Experts attribute the widespread use of imported timber to the lack of relationship between exporters and plantation farmers, which means the two sides know little about each other.
Another reason that contributes to exporters ignoring domestic materials is that the technology used for cutting wood in Viet Nam is outdated, affecting timber quality adversely.
Le Cong Uan, WWF's global trade and forest network co-ordinator, said that many exporters rejected domestic timber and relied on imports because the former did not have the Forest Stewardship Council (FSC) certificate.
FSC certification is a way of ensuring that careful and long-term forest management is being practised.
To sell materials from an FSC certified forest with the FSC logo, a forest manager must also get the FSC chain of custody certification.
Experts say wood processors should pay more attention to the domestic furniture market because demand is increasing rapidly in tandem with rapid urbanisation.
Meanwhile, domestic consumers do not require wood products of very high quality and FCS certification, noted Tran Duc Sinh of the Viet Nam Forestry Corporation.
Real estate stocks
Share prices of most real estate companies have dropped by about 30 per cent within a month.
This is believed to be one of the reasons for the recent plunges in the securities and real estate markets.
Over the last month, Vinaconex shares fell from VND22,000 to just VND14,000, while that of the Long Giang Urban Development and Investment (LGL) company fell from VND14,000 to under VND10,000. CII shares of the HCM City Infrastructure Joint Stock Company dropped from VND36,000 to VND26,000.
Shares of one of the biggest real estate firms, the Hoang Anh Gia Lai Group, went down from VND45,000 each to under VND30,000.
Market analysts say the sharp fall in real estate shares was because the business has become more and more difficult.
Most real estate firms are finding it very hard to develop projects without adequate credit. Commercial banks have been asked to cap loans for non-manufacturing sectors to 22 per cent by late June, and to 16 per cent by the year-end.
In this scenario, those who do manage to access bank loans have to bear very high interest rates (About 26 per cent per year or more).
The real estate gloom has obviously impacted the securities market. Last Tuesday, investors sent the stock market crashing to a new low with the VN-Index losing a hefty 15.25 points, or 3.65 per cent against the previous day to finish at 402.59.
The following day, the market continued to be in free fall mode for the tenth consecutive session, with downward velocity accelerating further.
The VN-Index lost a hefty 16.23 points, or 4.03 per cent, from the session earlier to reach 386.36.
There was not much improvement in the situation towards the end of last week.
vietnamnews, VNS
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