VINACHEM

Small commercial banks, who do not have VND3 trillion (US$160 million) in capital, will have to submit their plans to the central bank before the end of this month to increase their capital to that level.

Around 20 of them, all joint stock banks, will have to do so and raise the required capital by year-end.

State Bank of Viet Nam Governor Nguyen Van Giau has recently announced a roadmap for further augmenting capital to VND5 trillion and then VND10 trillion in a few years, which will mean more banks will have to get cracking.

But things cannot be more loaded against someone trying to issue shares.

The stock market remains gloomy, with the VN-Index hovering around the 500-point mark, more often below it.

Banking shares are no longer popular with investors, especially those of banks performing poorly.

To cap it all, Dragon Capital has begun to divest its 19 million shares in Sacombank this month. The share is a leader in terms of liquidity at the HCM Stock Exchange. Military Bank, which also sees huge trading volumes on the informal OTC market, is all set to list. These two large banks threaten to cut the ground from under the feet of the smaller ones.

Ownership rates for individuals and institutions have been falling, respectively reaching 10 per cent and 20 per cent last year, and could fall further to 5 per cent and 15 per cent next year under a bill on lending institutions. The central bank wants to head off any possible domination of a bank by a small group of shareholders.

Thus, those with the capacity to invest may be disqualified while others who are eligible may not have the money.

Nevertheless, several banks like Dai A and Mien Tay are going ahead with preparations to list, expecting it would help raise funds.

Banks that cannot raise the additional capital face liquidation or merger.

M&A activity picks up

Son Ha, a company listed in HCM City with interests in mechanical engineering, renewable energy, and property, is likely to sign a contract to sell stakes to a strategic partner tomorrow.

It will issue 10 million shares to increase its chartered capital to VND250 billion (US$13 million) from the current VND150 billion.

This follows a busy week of mergers and acquisitions.

Last Wednesday the Sai Gon Metropolitan Ltd, the foreign partner in the firm that built the Sai Gon Metropolitan office building in HCM City, announced it would buy out the 30 per cent stake held by its local partner, Binh Minh Construction Company.

This British Virgin Islands-registered company has agreed to all conditions by Binh Minh.

Gia Quyen, or Empower Securities Company, concluded a deal to sell 49 per cent to a Korean company, the maximum stake allowed under the law.

The local company will sell more than 12.86 million shares to the Korea Investment Securities Company, doubling its chartered capital to VND270 billion. EPS has to get approval from the State Securities Commission for its issuance.

EPS expects its partner to bring in Korean investors and provide consultancy to Vietnamese companies wishing to list overseas.

Also last week, Hoa Phat Group bought almost a 50 per cent stake held by others in Hoa Phat Energy Joint Stock Company to increase its ownership in the company from 50 per cent to 99.86 per cent.

The company says this would help it improve operations.

As usual, none of the parties in any of the deals were willing to disclose the sums involved.

The developments are in line with the forecast by the auditing and consulting firm PricewaterhouseCoopers of a growth in the number of such deals this year.

Inbound strategic acquisitions and private-equity deals are being fuelled by the global economic recovery and positive sentiment about Viet Nam's ability to continue to grow at strong rates despite the crisis, according to the firm.

Anti-dumping alert

With Vietnamese businesses often getting caught up in anti-dumping troubles, the Ministry of Industry and Trade has decided to set up an early warning system on anti-dumping.

It plans to create an internet-based system early next month to warn about anti-dumping proceedings against Vietnamese goods so that exporters will have time to respond to punitive action by importing countries.

The system will initially cover proceedings in the US and Europe, Viet Nam's two key export markets, before enlarging the coverage to other markets, according to Bach Van Mung, director of the ministry's Department of Competition Management.

The status of exports will be indicated in three different colors in the system.

Green will indicate that the export items are normal while yellow will mean the commodities are in danger of being sued for selling at below-market prices.

Red will indicate that a product group faces the highest risk of anti-dumping proceedings.

Recent anti-dumping proceedings have caused huge damage to Viet Nam in terms of profits and jobs.

The country's industry groupings have proved inadequate in dealing with such proceedings while enterprises were taken by surprise by the lawsuits due to the lack of information.

A lawsuit by the European Bicycle Manufacturers Association led to a decision by the European Union to slap anti-dumping tariffs of up to 34.5 per cent on Vietnamese bicycles in 2005.

(Source: VNS, by Thuy Anh)