The Vietnam Stock Exchange(s): What’s the point?
11 Nov 2014
Whilst we haven’t written a market commentary as such for some time a pair of developments today have caused our mounting sense of frustration to reach the point where a rant is unavoidable. We’ll try to keep it as brief and to the point as possible.
VIETNAM AIRLINES
A sensible candidate for Vietnam flagship listing of the year but sadly hugely overpriced, lacking in both transparency and clarity and no listing date mentioned in the plan. Not dissimilar in any meaningful way from any of the other IPOs this year. Result: reportedly oversubscribed by the merest smidgeon and 98+% of the available stock has gone to two domestic investors who are either funds or banks but in any event must be participating for not strictly commercial reasons. Zero interest from foreign investors, as one might expect given the background.
KINH DO CORPORATION (KDC)
The least well kept “secret” of the year, even for a market as (selectively) leaky as this. KDC this morning confirmed the proposed sale of 80% of the shares of a 100% subsidiary to a US investor, said subsidiary currently responsible for at least two-thirds of revenue. “But wait” (I hear you cry); “foreigners are only allowed to own a maximum of 49% of Vietnamese companies; how can that be?” True up to a point; foreigners can only own up to 49% of LISTED companies (30% of banks), but they can own up to 100% of NON-PUBLIC companies in non-sensitive sectors. And that seemingly now includes subsidiaries of public companies.
(Note to the stakeholders of ALL listed companies: if you want to sell your assets to the highest bidder (including foreigners), it would appear that you just need to transfer the relevant assets (hell; why not ALL your assets?) into a newly created, fit for purpose vehicle and you’re good to go.)
Does that sound like the point of a stock market as understood around the world? Actually, no. IPOs without listings? Takeovers of subsidiaries by investors prevented by law from acquiring the parent? Welcome to the other side of the looking glass.
THE VIEW FROM PHAN XI PANG
So what is the point of having a stock market if the rules are more restrictive than those for non-public companies (let alone the non-listed subsidiaries of public companies)? The answer is very simple: there is no point and the law is an ass.
Foreign investors are piling money into Vietnam through FDI, and the government (even after all the negativity around the Vinashin bond) sold a US$ 1 billion sovereign bond in (roughly) 5 minutes last week and it was 10 TIMES oversubscribed. And yet they can’t get a single foreigner interested in any IPO, and foreigners are not easily able to buy the listed stocks they want to buy unless they do so in off-market transactions with no transparency.
Are we alone in seeing a disconnect here? Or will logic eventually get a foothold in the stock market? We sincerely hope so. The latter, not the former.
Onwards and sideways otherwise.
Best regards,
Kevin Snowball
Chief Executive Officer