Tuesday, 23 Apr 2019

SOE divestment and equitization present opportunities for investors

Updated at Tuesday, 06 Nov 2018, 06:29
The Hanoitimes - Capital inflow into Vietnam, including both direct and indirect foreign investment, has been increasing over the past few years.
Vietnam’s stock market grew 70% in terms of scale and 48% in the main index last year, presenting good opportunities for investors, according to Tran Van Dung, chairman of the State Securities Commission of Vietnam (SSC), the country's stock market watchdog. 
Illustrative photo.
Illustrative photo.
Capital inflow, both direct and indirect foreign investment, into Vietnam has been increasing over the past few years, said Dung in a quick exchange with local media on November 3.

According to Dung, the market capitalization of the equity market has increased from 30% - 32% of the country's GDP five years ago to 70% as of 2017, reaching the government’s target set for 2020. 

Five years ago, Vietnam only had one enterprise capitalized over US$1 billion, and the figure has now reached 20, Dung continued. 

Statistics also showed that, in 2017 and the first six months of 2018, around 90% of listed companies have been generating profits. Meanwhile, capital inflow from the US and Japan into Vietnamese stock market has doubled over the past few years. In 2017 and the first half of 2018, investment capital from South Korea to Vietnam has been at the top among other countries. 

Dung also informed that the Vietnamese government would push forward with the equitization of 64 state-owned enterprises (SOEs) and divesting state capital from others 181 in 2018, in turn opening more opportunities for investors. 

Vietnam's effort to raise funds from the public-sector reforms is expected to triple in 2018 - 2020 compared to levels seen in the 2011 - 2017 period, according to Saigon Securities Inc (SSI), the largest brokerage house in the country.

Specifically, the total proceeds from initial public offerings (IPOs) and the share sales of SOEs in the next two years are expected to reach US$26.3 billion, 2.75 times higher than the sum raised for the whole period between 2011 and 2017. 

Of the total, the value of IPOs will reach US$9.7 billion, while the total amount of divestment could hit US$16.6 billion. 

"Vietnam could end up being the only country in the world that embarks on a new wave of SOE reform in 2018 - 2020, placing large and profitable SOEs on public offer," stated SSI. 

With the establishment of the State Capital Management Committee in February, the government plans to make its SOEs more compliant with market principles and practices, according to SSI. 

The divestment and equitization process of SOEs in 2017 contributed over VND144 trillion (US$6.34 billion) to the state budget, 2.41 times higher than the target set by the National Assembly, informed a 2017 report on utilizing state capital and assets at SOEs released on May 17. Among the most notable deals, the government sold a 53.6% stake in Sabeco for US$4.89 billion.
Nguyen Tung
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