Big state-owned economic groups are planning to withdraw their capital from many investment projects and institutions to gather strength in their main business fields. Therefore, the supply of stocks on the market is believed to increase sharply.
Capital withdrawal wave anticipated
The Vietnam National Oil and Gas Group PetroVietnam is selling the stakes it is holding at some subsidiaries on the stock market or through negotiation deals. Responding to the criticism that PetroVietnam is causing a “commodity oversupply” on the stock market, Dinh La Thang, Chair of the Board of Members of PetroVietnam said that restructuring the economic group is an important task which it cannot delay. In 2011, PetroVietnam will withdraw capital from the subsidiary companies operating in fields of finance, insurance and other fields which are unrelated to oil and gas – the main business field of PetroVietnam.
PetroVietnam Finance has sold two million DPM shares so far this year. It has registered to sell 2.1 million PVL shares and is going to sell one million PV2 shares by April. The investment portfolio restructuring began in 2010, when the company cut the number of its investment items by half.
PetroVietnam Construction Corporation had contributed 3.211 trillion dong worth of capital to subsidiaries by the end of 2010. In that year, the corporation sold stakes at many companies in a plan to restructure its investment portfolio, earning the profit of 281 billion dong. It is expected that in 2011, the corporation will earn 603.5 billion dong from selling more stakes.
Most recently, Vincom Corporation, a real estate group, decided to sell 22.5 million VIX shares, putting and end to its presence in the securities field. VIX now have the market price of 10,900 dong per share and relatively low liquidity with 20-30,000 shares traded per trading session.
In their business plans for 2011, other “big guys”, including Vinaconex and Vietcombank, have also mentioned restructuring their investment portfolios by withdrawing capital from many companies, including the ones which are listing shares on the bourse.
As for many investment funds which began their operations in Vietnam when the stock market boomed in 2005-2006, now is the time for the scheduled capital withdrawal. Mekong Enterprise Fund II, a fund with committed capital of $18.5 million, made 10 investment deals in 2003-2005 and now it is time for it to withdraw capital. In February 2011, it completed capital withdrawal from ICP Company by selling stakes to Marico, an Indian corporation.
There are many ways to withdraw capital
Fearing that the demand on the stock market is weak, PetroVietnam will choose powerful partners to sell a part of its capital at big projects, including Dung Quat Oil Refinery and Nhon Trach Thermopower Plants, instead of selling on the stock market. The sale of stakes through negotiations is the preferred way for PetroVietnam. It also negotiated with South Korean Samsung to sell stakes at PetroVietnam Construction to reduce the ownership ratio to 30 percent of chartered capital.
Experts say that it is very difficult but still feasible now to find investors who wish to buy stakes. PSI shares are trading at 11,000 dong per share only on the bourse, but Nikko Cordial pays 15,000 dong.
At Vinaconex, the process of capital withdrawal has been carried out in a way under which the subsidiaries of Vinaconex’s which are financially capable will inject money into the companies that the holding company is withdrawing capital from. This proves to be a good solution for Vinaconex, because this will not lead to the oversupply of Vinaconex-family’s shares.
Since the liquidity in the secondary market is limited, a lot of investment funds are deciding to sell stakes through negotiations. Dragon Capital, for example, has sold two million VNM shares to another foreign investor.
Tuyet Ngan
vietnamnet