Market plunges for third straight day

Investors watch stock prices at Vincom Securities Co. The VN-Index lost 3.34 points, or 0.73%, from a day earlier to close at 454.25 on Tuesday - Photo: Le Toan

HCMC – The local market declined for the third consecutive session on Tuesday, with the VN-Index shedding 3.34 points, or 0.73%, from the day earlier to close at 454.25 although liquidity improved sharply.

The market opened briefly higher again but subsequently fell back into negative territory and traded lower during the second matching phase to hit a low of 451.82 before rebounding slightly at the close.

On the Hochiminh Stock Exchange, demand surged 27.5% against the previous session to 53.8 million shares while supply rocketed 42.7% to over 64 million shares. Closing the day, the market’s total trading volume was 33.5 million shares worth VND884 billion, up 26% and 28% from a day earlier respectively.

Only 32 stocks advanced on Tuesday while 192 others closed in the red, including one stock hitting its ceiling price and 26 issues dropping to the floor prices.

Ocean Group Co. (OGC) took the lead in terms of liquidity but it lost 3.7% to VND28,200 per share on volume of 1.6 million shares. Vietnam Mechanization Electrification & Construction Co. (MCG) was the second biggest traded stock, adding 2.4% against the previous day to VND20,000 with 1.3 million shares changing hands.

Saigon Machinery Spare Parts Co. (SMA) began to trade over eight million shares on the bourse on Tuesday and it closed at VND15,000 against the reference price of VND16,200 with only 3,200 shares traded.

Foreign participation also recovered as investors acquired 3.8 million shares worth VND148 billion and offloaded 1.8 million shares worth 67 billion, making up 16.7% and 7.6% of the market’s buying and selling value respectively.

The Hanoi market also suffered three losing sessions in a row on higher turnover of VND587 billion. The HNX-Index fell 2.33 points, or 1.96%, against the previous session to close at 116.56.

There were 42 stocks rising while 258 others dropping back, of which one stock touched the ceiling price and 24 stocks plunged to the floor prices. Foreigners were slight net buyers again, accounting for 1.9% and 1.2% of the market’s buying and selling value respectively.

Vietnam International Securities Co. (VIS) in its report said investors once again became impatient and boosted selling towards the end of the session.

“We see that they were too cautious and declined to acquire shares at high prices, mostly because of strong fluctuations of gold and dollar prices. The Hanoi market also failed to improve as most investors still stayed on the sidelines,” VIS said.

HCMC Securities Corp. (HSC) said the buying size was more likely positioning than a major wave of buying. “However, with foreign limits in a host of blue-chips close to being full the smart money is picking up shares now while they can. We keep our positive medium and long-term stance while remaining cautious short term,” HSC said.

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TNK-BP to acquire BP's Vietnam, Venezuela assets

Russian oil company TNK-BP said on Monday it had agreed a deal with its part-owner BP to acquire the troubled British oil giant's assets in Vietnam and Venezuela for US$1.8 billion.

TNK-BP, Russia's third-biggest oil company, is owned 50 percent by BP and 50 percent by a group of Russian billionaires including banking magnate Mikhail Fridman known collectively as Alfa Access-Renova (AAR).

The divestment is in line with a plan by BP to sell up to $30 billion (€21.2 billion) of assets by the end of 2011 to help meet its financial obligations from the Gulf of Mexico oil spill.

"Today's agreement is further evidence of the rapid progress BP is making towards the divestment target we set out in July," BP's new chief executive, Robert Dudley, said in a statement

Dudley, who replaced Tony Hayward after the oil spill catastrophe, said that the acquisition would give TNK-BP a solid foundation to build its business outside Russia.

TNK-BP almost imploded during a venomous shareholder conflict between the co-owners in 2008 but the dispute was patched up when shareholders agreed to appoint Maxim Barsky chief executive effective from January 1, 2011, with Fridman taking the reins in the interim.

Ironically, Dudley was ousted as TNK-BP chief executive at the height of the conflict. With relations now smooth, Hayward has been nominated as non-executive director at TNK-BP after his departure from BP.

TNK-BP, which operates huge oil fields in Siberia and accounts for 16 percent of Russian production, has long been considered one of BP's crown jewels.

"The acquisitions in Venezuela and Vietnam mark a milestone in TNK-BP's strategic expansion in the global energy market," said Fridman, who is serving as acting chief executive of the company, in a TNK-BP statement.

TNK-BP said a deposit of $1 billion will be made by October 29 with final payment upon completion.

"Subject to government approvals and the fulfilment of other agreed pre-closing conditions, the companies expect the transaction to be completed in the first half of 2011."

According to the terms of the agreements, in Venezuela TNK-BP will acquire from BP a 16.7 percent equity stake in the PetroMonagas SA extra heavy oil producer, a 40 percent stake in Petroperija SA which operates the DZO field, and a 26.7 percent stake in Boqueron SA.

The deal comes after Russian and Venezuela on Friday signed a memorandum of understanding supporting the acquisition, at a ceremony in the Kremlin attended by Venezuelan President Hugo Chavez and Russia's Dmitry Medvedev.

In Vietnam, TNK-BP will acquire from BP a 35-percent stake in an upstream offshore gas production block containing the Lan Tay and Lan Do gas condensate fields, a 32.7-percent stake in the Nam Con Son Pipeline and Terminal, and a 33.3-percent stake in the Phu My 3 power plant.

The acquisitions of the assets in Venezuela and Vietnam will bring TNK-BP net proved and probable reserves of 290 million barrels of oil equivalent, it said.

TNK-BP has also expressed interest in acquiring BP's assets in Algeria and the issue was discussed earlier this month during a visit by Medvedev to the North African country.

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TNK-BP to acquire BP's Vietnam, Venezuela assets

Russian oil company TNK-BP said on Monday it had agreed a deal with its part-owner BP to acquire the troubled British oil giant's assets in Vietnam and Venezuela for US$1.8 billion.

TNK-BP, Russia's third-biggest oil company, is owned 50 percent by BP and 50 percent by a group of Russian billionaires including banking magnate Mikhail Fridman known collectively as Alfa Access-Renova (AAR).

The divestment is in line with a plan by BP to sell up to $30 billion (€21.2 billion) of assets by the end of 2011 to help meet its financial obligations from the Gulf of Mexico oil spill.

"Today's agreement is further evidence of the rapid progress BP is making towards the divestment target we set out in July," BP's new chief executive, Robert Dudley, said in a statement

Dudley, who replaced Tony Hayward after the oil spill catastrophe, said that the acquisition would give TNK-BP a solid foundation to build its business outside Russia.

TNK-BP almost imploded during a venomous shareholder conflict between the co-owners in 2008 but the dispute was patched up when shareholders agreed to appoint Maxim Barsky chief executive effective from January 1, 2011, with Fridman taking the reins in the interim.

Ironically, Dudley was ousted as TNK-BP chief executive at the height of the conflict. With relations now smooth, Hayward has been nominated as non-executive director at TNK-BP after his departure from BP.

TNK-BP, which operates huge oil fields in Siberia and accounts for 16 percent of Russian production, has long been considered one of BP's crown jewels.

"The acquisitions in Venezuela and Vietnam mark a milestone in TNK-BP's strategic expansion in the global energy market," said Fridman, who is serving as acting chief executive of the company, in a TNK-BP statement.

TNK-BP said a deposit of $1 billion will be made by October 29 with final payment upon completion.

"Subject to government approvals and the fulfilment of other agreed pre-closing conditions, the companies expect the transaction to be completed in the first half of 2011."

According to the terms of the agreements, in Venezuela TNK-BP will acquire from BP a 16.7 percent equity stake in the PetroMonagas SA extra heavy oil producer, a 40 percent stake in Petroperija SA which operates the DZO field, and a 26.7 percent stake in Boqueron SA.

The deal comes after Russian and Venezuela on Friday signed a memorandum of understanding supporting the acquisition, at a ceremony in the Kremlin attended by Venezuelan President Hugo Chavez and Russia's Dmitry Medvedev.

In Vietnam, TNK-BP will acquire from BP a 35-percent stake in an upstream offshore gas production block containing the Lan Tay and Lan Do gas condensate fields, a 32.7-percent stake in the Nam Con Son Pipeline and Terminal, and a 33.3-percent stake in the Phu My 3 power plant.

The acquisitions of the assets in Venezuela and Vietnam will bring TNK-BP net proved and probable reserves of 290 million barrels of oil equivalent, it said.

TNK-BP has also expressed interest in acquiring BP's assets in Algeria and the issue was discussed earlier this month during a visit by Medvedev to the North African country.

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Vietnam has no devaluation plans: newspaper

The State Bank of Vietnam has no plans to adjust the dong exchange rate against the US dollar, even though the dong's value has been dropping on the unofficial market, a local newspaper reported on Tuesday.

"At present the State Bank does not have any plans for exchange rate adjustment," Governor Nguyen Van Giau was quoted by the Saigon Giai Phong daily as saying, rejecting market rumors of a dong devaluation.

The central bank has devalued the dong three times since November and speculation of another devaluation has been putting pressure on the currency, making businesses reluctant to sell dollars.

Dollar demand has also been rising as businesses need the currency for loan repayments and importers need dollars for settlements.

However, the dong edged up to 19,870/19,920 per dollar on the unofficial market on Tuesday morning from 19,920/19,970 on Monday, while it was steady at VND19,490/19,500 on the interbank market, with the selling rate at the permitted ceiling.

Victoria Kwakwa, the World Bank's representative in Vietnam, told reporters on Tuesday that "we think that broadly the government has been moving in the right direction" on monetary and fiscal policy.

However, she said more could be done by the authorities to communicate their policy stance and give more information on indicators, so as to build up confidence in overall macroeconomic management.

This would help "address some of the left-over expectations of inflation and continued instability that are underpinning some of the challenges".

The Bank's lead economist for Vietnam, Deepak Mishra, said he expected pressure on the dong to ease over time, but how the market reacted would depend on the government putting forward a "credible road map" for dealing with the problem.

The International Monetary Fund warned in September that Vietnam needed to concentrate on maintaining the level of the dong, and said that repeated comments from the government about the need to lower lending rates was counter-productive.

"A lack of coordination between monetary and fiscal policies, or the appearance thereof, would amplify market skepticism," it said.

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World Bank finds cause for worry amidst rapid recovery

Vietnam’s recovery from the economic crisis has been fast but uneven, and improved governance of state-owned enterprises is needed to ensure strong and sustainable growth, the World Bank says.

The nation’s key economic indicators are expected to recover to “near their pre-crisis trend growth rates” but there are still concerns about a “soft landing” for the country, the bank said in its latest East Asia and Pacific Economic Update released Tuesday.

The current account deficit remains high and there is “persistent pressure” on the local currency as households and firms appear to continue to stockpile foreign currency and gold, it said.

Bankers said this week that speculation of another devaluation is putting pressure on the dong, making businesses more reluctant to sell dollars to banks.

Le Xuan Nghia, deputy director of the National Financial Supervisory Commission, told Reuters the pressure on the dong was increasing as businesses needed to accumulate dollars to settle greenback loans they had taken in earlier months of the year. “But I don't think there should be a devaluation at this point of time, as the pressures are not large enough,” he said.

The World Bank also said Vietnam’s current account deficit remains high and there are concerns about the balance sheet of some of the banks.

“The stock market, after staging a smart recovery in 2009, has slumped again and continues to underperform the broader economy,” the bank said in the report. Vietnam’s benchmark VN-Index has fallen by more than 11 percent so far this year.

The government is trying to “phase out the stimulus package without disrupting the economy”, the bank noted, adding that the economy is on track to achieve the 2010 target of 6.5 percent

State sector

According to the World Bank, state-owned enterprises have played an important role in Vietnam’s progress, but have also become “a source of long term vulnerabilities.”

“While some of the Economic Groups have served the cause of their existence (e.g., Vietnam Posts and Telecommunications Group, Electricity of Vietnam, PetroVietnam, etc.), many have also contributed to magnify the economic instability,” it said.

The bank said in its report that in late 2007 and early 2008, the groups invested heavily in the financial sector and real estate, exacerbating the asset price bubbles.  It cited the case of shipbuilder Vinashin, which was on the verge of default, as an example of a state-owned enterprise that failed.

Vinashin piled up to $4.5 billion in debt, leading to a restructuring and a financial investigation in to the firm. Several top managers of the shipbuilder have been arrested for mismanagement.

The World Bank said improved governance of the Economic Groups, along with a new law on public investment and a new framework for public private partnership, will “boost structural reforms in Vietnam and set the foundation for a strong and sustainable growth.”

At the regional level, the bank said the economic recovery in East Asia and the Pacific is robust, but attention must now turn to managing emerging risks.

“Should inflows remain strong, especially against a background of weak global growth, the authorities will be faced with the challenge of balancing the need for large capital inflows – especially foreign direct investment – with ensuring competitiveness, financial sector stability, and low inflation,” said Vikram Nehru, World Bank Chief Economist for the region.

The bank also said in its report that the ongoing relocation by manufacturing firms from higher wage countries in East Asia is beginning to benefit Vietnam, “which with its relatively low wages and easy access to coast is well positioned to absorb such investments.”

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World Bank finds cause for worry amidst rapid recovery

Vietnam’s recovery from the economic crisis has been fast but uneven, and improved governance of state-owned enterprises is needed to ensure strong and sustainable growth, the World Bank says.

The nation’s key economic indicators are expected to recover to “near their pre-crisis trend growth rates” but there are still concerns about a “soft landing” for the country, the bank said in its latest East Asia and Pacific Economic Update released Tuesday.

The current account deficit remains high and there is “persistent pressure” on the local currency as households and firms appear to continue to stockpile foreign currency and gold, it said.

Bankers said this week that speculation of another devaluation is putting pressure on the dong, making businesses more reluctant to sell dollars to banks.

Le Xuan Nghia, deputy director of the National Financial Supervisory Commission, told Reuters the pressure on the dong was increasing as businesses needed to accumulate dollars to settle greenback loans they had taken in earlier months of the year. “But I don't think there should be a devaluation at this point of time, as the pressures are not large enough,” he said.

The World Bank also said Vietnam’s current account deficit remains high and there are concerns about the balance sheet of some of the banks.

“The stock market, after staging a smart recovery in 2009, has slumped again and continues to underperform the broader economy,” the bank said in the report. Vietnam’s benchmark VN-Index has fallen by more than 11 percent so far this year.

The government is trying to “phase out the stimulus package without disrupting the economy”, the bank noted, adding that the economy is on track to achieve the 2010 target of 6.5 percent

State sector

According to the World Bank, state-owned enterprises have played an important role in Vietnam’s progress, but have also become “a source of long term vulnerabilities.”

“While some of the Economic Groups have served the cause of their existence (e.g., Vietnam Posts and Telecommunications Group, Electricity of Vietnam, PetroVietnam, etc.), many have also contributed to magnify the economic instability,” it said.

The bank said in its report that in late 2007 and early 2008, the groups invested heavily in the financial sector and real estate, exacerbating the asset price bubbles.  It cited the case of shipbuilder Vinashin, which was on the verge of default, as an example of a state-owned enterprise that failed.

Vinashin piled up to $4.5 billion in debt, leading to a restructuring and a financial investigation in to the firm. Several top managers of the shipbuilder have been arrested for mismanagement.

The World Bank said improved governance of the Economic Groups, along with a new law on public investment and a new framework for public private partnership, will “boost structural reforms in Vietnam and set the foundation for a strong and sustainable growth.”

At the regional level, the bank said the economic recovery in East Asia and the Pacific is robust, but attention must now turn to managing emerging risks.

“Should inflows remain strong, especially against a background of weak global growth, the authorities will be faced with the challenge of balancing the need for large capital inflows – especially foreign direct investment – with ensuring competitiveness, financial sector stability, and low inflation,” said Vikram Nehru, World Bank Chief Economist for the region.

The bank also said in its report that the ongoing relocation by manufacturing firms from higher wage countries in East Asia is beginning to benefit Vietnam, “which with its relatively low wages and easy access to coast is well positioned to absorb such investments.”

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Dai-ichi Life Vietnam sees premiums up 51%

HCMC - Dai-ichi Life Insurance Company of Vietnam reported on Tuesday strong year-on-year growth of 51% in new business premiums to nearly VND230 billion (US$11.8 million) in the January-September period, almost the same as the total of last year.

The Japanese life insurer said its third-quarter premiums hit a high of nearly VND110 billion, giving it confidence in achieving the business target of 2010 and strengthening its position in the life insurance market in Vietnam.

“Our target for 2010 is to grow by at least 50% for new business sales premiums, and to earn higher profits than in 2009,” Takashi Fujii, chairman and general director of Dai-ichi Life Vietnam, said in a statement.

Fujii said the higher-than-expected business performance supported the company’s plans to continue sales office network expansion across the country and enhance the relationships with strategic partners.

Fujii credited the business success in the three quarters to the company’s big investment in infrastructure, new products to meet the diverse needs of customers, and the quality of customer service to match the demand.

Dai-ichi Life Vietnam is pressing ahead with a plan to expand its office network with emphasis on general agency offices. With 14,500 staff and agencies at 56 offices nationwide, the company is now serving more than 510,000 customers and ready for a bigger share of the market.

Dai-ichi Life Vietnam said it would focus on strengthening cooperation with partners in the banking industry and new investments as one of the ways the company was pursuing to improve its business efficiency.

Vietnam is the first foreign market for the Japan-based Dai-ichi Life Insurance Co. Ltd. to expand life insurance business by establishing a wholly-owned subsidiary. In January 2008, Vietnam’s Ministry of Finance allowed Dai-ichi Life Vietnam to increase its charter capital from US$25 million to US$72 million, after one year of its official operations in this market.

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