Slow day for Vietcombank bonds

Only 4,000 bonds sold on July 28, equivalent to 5 per cent of the total offered at the Ho Chi Minh City Securities Trading Centre. The purchased price range was VND102,000-130,000, lower than the expected VND140,000-172,000. The bank lists 13.7 million bonds at the trading centre with a par value of VND100,000, under the condition that holders may convert them into shares once the bank was equitised.
Bonds sold out quickly on the primary market, although interest was only 6 per cent and the terms relatively long, at seven years. One reason for the low sales figure was a lack of proper understanding among domestic investors about the right to buy Vietcombank shares once the bank is equitised.
“Investors expect to hold Vietcombank bonds and enjoy high dividends from the bank’s business. However, the bank only offers the average price on the market once the bond is converted to shares and it is hard for the investors to get profit from bonds,” said a securities market observer.
Lack of foreign investor interest is also another main reason. They are not allowed to participate in the transactions, while domestic organisations expected to create large demand only want a price 10 per cent higher than face value.
Vu Bang, chairman of the State Securities Commission, said the commission only gave approval for the bank to sell to domestic organisations and individuals.
“The bond listing aims to increase facility, safety and transparency in bond transactions created on the primary market already,” said Bang.
Market observers predicted that the bond price would further decrease from its position 60-70 per cent higher than its over the counter face value making the price unreasonable.
“The listing will make the information and bond transactions more transparent on the official trading centre,” said Bang.
With the bond issue, Vietcombank will become the first State-owned commercial bank to reach the safe limit of capital, at 8 per cent, in compliance with international accounting standards.




No. 772/July 31-August 6, 2006