Gradually deflating bubble

28 December 2007 By Martin Hutchinson

Tepid response to the overpriced Vietcombank deal suggests investor enthusiasm for Vietnamese stocks is waning. Corruption and poor property rights may sidetrack Vietnam s economic growth. However, low wages, high literacy and China s example should make any pause short.

This content is for Subscribers only

Context News

The Vietnamese government sold a 6.5% stake in its secondlargest bank, the Bank for Foreign Trade of Vietnam (Vietcombank) on December 26, selling 97.5m shares with a minimum bid of VND100,000 ($6.24) per share. The issue was 1.25 times subscribed, with an average accepted bid of VND 107,860 per share; the bank closed trading December 27 at VND 102,000. The bank has assets of VND 187tn, projected 2007 equity of VND13.0tn and projected 2007 net income of VND 1.85tn.

Vietnam's gross domestic product (official exchange rate) was $48.4bn in 2006, and grew at 8.2%; it is expected to grow at 8.4% in 2007. Inflation in 2007 was 12.6%, up from 7.8% in 2006. Its population is 85m, its GDP per capita (purchasing power parity) was $3,100 and its budget deficit 3% of GDP on public spending of 34% of GDP. Vietnam's exports were $39.9bn, its imports $40.6bn., its foreign debt 45% of GDP. Foreign investment pledged in 2007 was $20.2bn, up 68% over 2006. Vietnam ranked 123rd on Transparency International's Corruption Perceptions Index in 2007, down from 111th in 2006, well below China and India (both equal 72nd) although above the Philippines (131st), Pakistan (138th), Indonesia (143rd) and Bangladesh (162nd)

Vietnam's Ho Chi Minh Stock Index closed December 27 at 921.75, up 200% since December 2005, but down 23% from its March 2007 peak. The market's capitalisation is about $25bn, 50% of Vietnam's GDP and it is currently trading at about 25 times estimated 2008 earnings.

Context News

Email a friend

Please complete the form below.

Required fields *