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Gov’t told to expedite IPOs for State-owned companies
28 | 09 | 2007
Economic experts said yesterday the Government should proceed with its initial public offering (IPO) plan for large State-owned companies, rather than holding off until the market heats up again.

Thirty government economic experts and securities company representatives gathered yesterday in a conference on initial public offerings in the Vietnamese stock market, held by the Finance Institute.

"Now that the prices of shares are closer to their real value, new IPOs will be a driving force for the stock market’s growth, as IPOs of large State-owned companies will bring the market good commodities," said Dang Van Thanh, former deputy chairman of the National Assembly’s Economic Affairs and Budget Committee.

In his opinion, there are many reasons to implement IPOs now.

Thanh said there is still an abundant supply of capital in the economy, even with the 3 per cent cap on stock loans imposed on (joint stock) commercial banks, because State-owned commercial banks can still increase their percentage of stock loans.

Secondly, Thanh said, foreign funds are waiting for investment opportunities and have already expressed their interest in the upcoming IPOs of large equitised companies.

Delaying the IPOs of 20 corporations and nearly 400 enterprises and banks would not, as people expect, bring better results, because the scale of usable capital would not change much, he said.

Finally, Thanh said the fact that the market is not as hot as it could be at the moment does not mean that companies would not still get a good return on their shares, because a company’s performance is a more decisive factor in setting the share price than the market’s performance.

Share prices remaining at a reasonable level will help maintain the stabilisation of the market to some extent, Thanh added. This advantage should not be undervalued, given that the Government’s supreme target is to stabilise the stock market, he said.

Nguyen Minh Phong, Head of the Economics Research Section, under the Ha Noi Institute for Socio-economic Development Studies, said: "Upcoming IPOs will create new investment opportunities. If they are not held in time, capital in the economy will be unproductive or flow to other markets."

"The Government should continue with its equitisation plan as scheduled, otherwise it will lose its prestige, because the plan is a national-level programme."

"I think that to make equitisation more effective, the State should reduce its stake in enterprises which do not need 100 per cent State investment; even companies that the State already has a 51 per cent stake in."

Thanh said: "Currently, only 13-14 per cent of State-owned enterprises are equitised, and in 50 per cent of equitised companies the State’s stake is 50-51 per cent."

"This means that the Government is still holding a large amount of capital, which will make it difficult for companies to change their management methods and for the country to restructure its economy."

According to Thanh, "The equitisation of State-owned companies has been planned and this is a major State programme. The Government should not hold back on these IPOs if it wants to ensure that all State-owned companies have been converted to limited or joint stock companies by 2009 on schedule."

He said, at the same time, the Government should not hold rapid-fire IPOs, as a sudden change would probably have a negative effect on the economy.

Tran Dinh Cuong, deputy general director of auditing company Ernst & Young Viet Nam, said companies’ IPOs, especially large ones, are still attractive to investors.

However, the transparency of IPO prospectuses and the level of information disclosure remained as problems that needed to be addressed.

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