Vietnam Predicted to See Rise in IPOs for 2014 as Equitization Continues

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Hanoi – A number of companies in Vietnam are expected to opt for initial public offerings (IPO) in 2014. In particular, many state-owned companies are expected to issue IPOs due to the Vietnamese government’s continuing push for equitization in its economy. The Hanoi Exchange expects the country’s equity market to have a strong year, which should in-turn drive more companies to list on the stock exchange.

Equitization refers to the process that the Vietnamese government is using to convert state-owned enterprises into public limited companies or corporations.  Although having easy access to credit, state-owned companies suffer from abysmally low efficiency – equitization is the government’s plan to boost the financial and operational strength of the state sector.

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A representative from Vietnam’s Corporate Finance Department was quoted as saying that “the restructuring of state-owned enterprises, including the privatization efforts, would lead to an increase in the supply of high-quality shares in the market.” Initial share prices of the companies will typically be determined by the respective government department that represents the State’s ownership.

The number of listed shares on the market is expected to rise significantly this year, in part due to privatization, but also because of Decree 108/2013/ND-CP.  This Decree states that once joint-stock companies begin selling shares to the public, the company must list itself on the stock exchange within one year.

The Vietnam National Textile and Garment Group (Vinatex) is expected to finally launch its IPO as the country’s garment and apparel industry begins to be more attractive to investors as a result of the expected benefits arising from the, not yet completed, Trans-Pacific Partnership. Vietnam Motors Industry Corporation (Vinamotor) is also a potential target for investors due to rumors that the state-owned company will launch an IPO sometime soon in 2014.

According to the Transport Ministry, ten companies in the transport sector will conduct IPOs.  Three other subsidiaries of the Transport Ministry, Viet Nam Waterway Construction Corporation (Vinawaco), Thang Long Construction Corporation (TLG) and Transport Engineering Design Inc. (Tedi) will be put through the equitization process (the companies will sell more than 17 million shares to their strategic partners).  Additionally, the Bank for Investment and Development of Vietnam (BIDV) and national carrier Vietnam Airlines are in the process of preparing their IPOs.

Vietnam Airlines is an especially good case of the state-owned company equitization process.  The government initially wanted the company to complete its equitization in 2013; however, the company missed its deadline (a not uncommon occurrence for this process). The company is now preparing for an IPO to take place in the second quarter of 2014.   Signaling the government’s attitude, Prime Minister Nguyen Tan Dung was quoted by the official news source Thanh Nien (Young People) as saying that “Vietnam Airlines’ executives should seriously accelerate the privatization of the airline this year or face replacement.”  The airline plans to increase its fleet by 28 percent.

The Vietnamese air industry is expected to take off in 2014 due to increasing local competition through fleet expansions, new routes, and planned share offerings.  The industry is expected to be one of the world’s three fastest growing markets in 2014.

The Vietnamese government has also stated that, by 2015, it wants to see the restructuring of the Vietnam Shipbuilding Industry Group (Vinashin), Vietnam Railways and Vietnam National Shipping Lines (Vinalines).

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