A boom in new stock share sales

Nguyen Son, head of the country's stock market watchdog State Securities Commission (SSC) Market Development Department, said that his commission had been receiving many applications for new share sales as listed firms sought ways to raise funds amidst high lending rates.

"With the increasing number of applications, we are afraid that this year will set a record for new share sales, even much higher than 2007, the year Vietnam's stock market reached its peak," Son told VIR Online at a debate on Market Quarter 4 Outlook in Hanoi last week.

Banks are offering 14 to 15 per cent annual lending rates to enterprises, compared to around 12 per cent and even lower in 2009. With such rates, economists said it was too difficult for firms to earn profits.

Listed firms have aimed to mobilise around VND34.62 trillion ($1.8 billion) through share sales, private placements, initial public offerings (IPO) and corporate bonds. Of these, the IPO value has reached only VND2.1 trillion ($110 million).

In the third quarter alone, listed firms issued new securities worth VND16 trillion ($842 million), compared to VND18.6 trillion ($979 million) in the first half of this year, according to SSC statistics.

Son did not reveal the estimated number of new share values for 2010, but statistics from the financial media information company StoxPlus Corporation said that listed firms and banks planned to mobilise a total VND92 trillion ($4.8 billion) in 2010, the highest amount so far.

In 2007, when the domestic stock market bubbled, listed firms issued just VND63 trillion ($3.3 billion), while in 2008, the number was VND29 trillion ($1.53 billion) and in the crisis year of 2009, VND21 trillion ($1.1 billion), according to StoxPlus statistics.

The massive new share sales have raised oversupply concerns and some investors aggressively voiced that the SSC should tighten issuing rules to prevent abuse.

"Listed firms that have been granted licenses for new share sales in the third quarter can finish issuing in the last quarter of this year and later can delay to early next year," said Son.

Hoang Thach Lan, brokerage director with Mekong Housing Bank Securities,  said one of the key functions of the stock market encouraging enterprises to float on bourses was capital mobilisation ability. Therefore, the new share sales were legal if the shareholders voted for them. 

 "The question here is how to channel the money flow and how the new shares can attract investors," said Lan.