Vietnamese big guys quit foreign bourses, give up the games

VietNamNet Bridge – A series of Vietnamese leading companies hurried to draw up the plans to seek international capital by listing their securities on foreign bourses. However, this turns out to be not easy like a knife through butter as they initially thought.

The story of Hoang Anh Gia Lai

Once being the most influential name on the Vietnamese bourse, Hoang Anh Gia Lai decided to put its securities into transactions on the Singaporean Stock Exchange (SGX) more than one year ago.

However, nowadays, even Credit Suisse Singapore, the consultant to Hoang Anh Gia Lai, also advised Hoang Anh Gia Lai to leave the Singaporean bourse.

The group has announced its delisting decision commencing from mid August, though the corporate bonds worth 90 million dollars would be matured only by 2016.

No one could imagine before that Hoang Anh Gia Lai would have to quit the foreign playing field just after 15 months of staying there.

According to Nguyen Van Su, General Director of Hoang Anh Gia Lai, there are two reasons leading to the delisting decision. Firstly, the number of bond holders is not high; therefore, it is not necessary to continue listing the securities.

Secondly, the delisting would allow Hoang Anh Gia Lai to save money, because it would not have to pay the annual fee to maintain the listing.

According to Vo Truong Son, Deputy General Director of Hoang Anh Gia Lai, in charge of financial issue, Hoang Anh Gia Lai issued corporate bonds in early 2011, hoping to raise funds to implement hydropower and rubber projects.

Hoang Anh Gia Lai initially hoped to raise 200 million dollars worth of funds from the bond issuance. However, the unfavorable economic conditions at the issuance time, plus the tsunami and earthquake in Japan both made the bond issuance unsuccessful than expected. The group could mobilize 45 percent of the capital it wanted.

Despite the problem, Hoang Anh Gia Lai still listed the shares on SGX. However, after realizing that the bond liquidity was not high after a period of listing, Hoang Anh Gia Lai, after consulting with Credit Suisse Singapore, decided to delist the bonds.

As Hoang Anh Gia Lai is a big economic group, every its move would catch the special attention from the public. It once stirred up the public when announcing the plan to list bonds on SGX, so it is understandable why the delisting has been “dissected” by analysts.

According to Trinh Thanh Can, a senior executive of the HCM City Securities Company, it is very likely that the Hoang Anh Gia Lai bond holders are the big clients of Credit Suisse. Therefore, once the financial institution acted as the consultant to Hoang Anh Gia Lai in the bond issuance and the listing at SGX, it would also be able to act as the intermediary to help transfer bonds.

Can said once Hoang Anh Gia Lai’s bonds have weak liquidity, the listing would not have much significance.

Meanwhile, a member of the Vietnam Bond Association has given another explanation. Hoang Anh Gia Lai has to pay the interest of 9.875 percent per annum, a relatively high rate if noting that the dollar loan interest rates in developed countries are just 4-5 percent per annum.

Also according to the analyst, Hoang Anh Gia Lai, an economic group operating in many different business fields, still has been relying on the income from real estate projects. This means that Hoang Anh Gia Lai may meet some problems in the cash balance in the current context of the frozen real estate market.

The biggest credit rating firms including Standard & Poor’s (S&P) and Fitch all have given warning about the problem, thus forcing international investors to keep cautious with Hoang Anh Gia Lai’s bonds.

Since the bonds cannot catch the attention from the investment circle, very few transactions of Hoang Anh Gia Lai bonds have been reported, or the bonds have weak liquidity. Therefore, delisting proves to be a wise move for Hoang Anh Gia Lai for now.

The story of Vinamilk

Vinamilk, known as the leading dairy producer in Vietnam, first mentioned the plan to list its shares on a foreign bourse in 2005. But only in 2008, did the company’s plan get the nod from the Singaporean Stock Exchange.

In 2009, Vinamilk announced the decision that the foreign ownership ratio I the company must not be higher than 46 percent, instead of 49 percent as allowed by the laws. Meanwhile, the “idle room” of three percent would be reserved for foreign investors after Vinamilk lists its shares on SGX.

However, one year ago, Vinamilk surprised financial experts when deciding to cancel the plan. Instead of calling for capital on the international market, Vinamilk believed that it would be better to seek capital right on the home market. And it has issued shares to foreign investors on the domestic market.

It seemed that Vinamilk made a right move when changing its plan. It successfully mobilized the capital it wanted. Especially, investment funds accepted to pay 130,000 dong for a Vinamilk share, which was 30 percent higher than the Vinamilk market price at that moment.

The Ban Viet Securities Company, the consultant to Vinamilk, said the demand for Vinamilk shares was big enough that made the company believe that Vinamilk shares would still be selling like hot cakes on the domestic market, and no need to go abroad to seek capital.

Commenting about the move, financial experts believed that Mai Kieu Lien (General Director of Vinamilk) took a right move of the game when deciding to seek capital domestically.

If Vinamilk had called for capital in the international market, it would have to pay a relatively high cost for the listing of the three percent of shares. Meanwhile, three percent proves to be too small to catch the attention of the big financial institutions. In this case, Vinamilk would not get any benefits if it wants to popularize its brand.

In order to list shares on the Singaporean stock market SGX, Vinamilk would have to follow very strict procedures and overcome a lot of barriers, including the difference in the accountancy mechanisms and the information exposition regulations applied in Vietnam and Singapore.


Part 2: Foreign bourses remain a too far finish point for Vietnamese businesses