State ownership at firms to fall further

Trung said at the October 14-16 VinaCapital Investor Conference in HCMC that State-held shares at the already equitized enterprises would be sold to raise funds for the projects that need State money.

The Government has allowed State Capital Investment Corporation (SCIC) to sell its 45.1% stake at Vietnam Dairy Products Joint Stock Company (Vinamilk) and shares at other major firms.

Commenting on the Government’s new approval for the withdrawal of State capital from 10 companies, chief executive officer of VinaCapital Vietnam Opportunity Fund Ltd. (VOF) Andy Ho said SCIC would decide when to sell State holdings.

He said foreign investors may spend US$3-4 billion buying corporate shares held by the State.

However, they will have to carefully look into the requirements for foreigners to acquire State stakes and when SCIC sells shares. SCIC may hold auctions to sell State stakes to local and foreign investors, Ho told reporters on the sidelines of the conference.

Meanwhile, specialists at Hochiminh City Securities Company (HSC) said the State budget deficit this year may be among the reasons for the Government’s decision to strongly divest State holdings at the ten enterprises.     

The Government will likely use the proceeds from the sales of State shares to fund infrastructure projects. 

Stock traders are expected to react positively to the divestment move as the availability of blue-chips on the stock market is limited, which has hindered big capital inflows.

A bank said Vinamilk shares worth a combined US$2.5 billion may be offloaded in the coming time. This will be a big opportunity for foreign investors who are interested in shares of the country’s leading dairy firm.

Speaking to the Daily, a banking expert said the Government has decided to divest State holdings as the business landscape in Vietnam has changed. Given the country’s deeper international integration, the Government should create a favorable environment for firms to do business rather than acting as an investor.

HSC commented in a report that this is a major breakthrough as foreign investors can gain easier access to blue chips such as VNM and FPT. However, investors will have to await a clear timetable; whether the proposed work-around of the definition of foreign owned company/investors for stock market trading as proposed in draft Circular 74 is accepted and clarification of the updated non-restricted list in due course. 

State capital divestments from the 10 enterprises may encourage foreign investors to invest in the firms if foreign ownership limit (FOL) increases are permitted. The list of conditional business sectors is expected to come out within this month.

HSC said the divestment will not be carried out in the short term as requirements for foreign ownership are not yet available. In addition, a schedule for the divestment is unclear now.

On the other hand, SCIC wants to keep a strategic stake at Vinamilk. If SCIC is not urged to proceed with the divestment, the process might move slowly, the brokerage commented.