Banking Stocks Price Falling

The over-the-counter market for unlisted shares (OTC) has been freezing and the prices of many banking shares have been falling recently. The drop in banking shares has caused stress for most investors.

 

According to the report of the professional board in the Club for Securities Investors (CSI), the price of shares on the OTC market in recent months has concurrently fallen. Especially, stock groups in the banking sector have seen a downward trend both in demand quantity and price, in spite of optimistic business results in the second quarter this year and increased registered capital.

 

Viet A Commercial Joint Stock Bank (VAB) has planned to raise its registered capital to VND1,250 billion (US$78.1 million) from VND500 billion (US$31.25 million) at the end of August this year via share issuance. However, the VAB shares were traded at only VND4.5 million each share, down over 50 per cent from earlier this year. The shares of the Maritime Commercial Joint Stock Bank (Maritime Bank) and the Military Joint Stock Commercial Bank (MB) still had no trading, even after they announced their pre-tax profit in the first six months of this year was equal to all of last year.

 

Vietnam Export Import Commercial Joint Stock Bank (Eximbank) also scaled up its chartered capital to VND2,800 billion (US$175 million) in the second quarter this year. It sold VND500 billion worth of shares to 16 strategic partners and domestic institutional investors, raking in more than VND4,000 billion (US$250 million). However, Eximbank held a shareholders’ meeting to announce the company’s equity raising plan, and plan to sell 15 per cent stake to Japan’s Sumitomo Bank (SMHB) and 10 per cent to other strategic partners, to boost its chartered capital to VND3,733 billion (US$ 233.3 million) as soon as possible. But the trading price of Eximbank shares on the OTC market just fluctuates around VND7-7.1 million each share.

 

The Vietnam Bank for Private Enterprises (VPBank) maintained good business growth in the first six months of 2007, with total assets reaching VND12,000 billion (US$750 million), pre-tax profit of VND140 billion (US$8.75 million) after deducting risk provision. VPBank is now operating 120 transaction offices nationwide. However, VPBank share price tends to decrease to around VND42,000-43,000 each. Other shares such as Techcombank and East Asia Bank (EAB) have also experienced a downtrend. Techcombank shares are now trading at small volume, at a price around VND89,000 each, EAB at VND62,000. Techcombank and EAB prices have dropped by 40 per cent and 60 per cent on average, respectively from the peak in February this year.

 

Based on the CSI’s report, shares of construction and real estate companies have also not maintained their attractiveness. There are few transaction activities on the market, with a very small trading volume, such as Vinaconex traded at VND60,000-62,000 each, or Contrexim at VND38,000-40,000.

 

Other shares groups such as energy, oil and gas, seafood, food and foodstuff, transport, import and export and chemicals, although supported by the companies’ good business results, expansion and cooperation in production and technology, have still suffered falling prices.

 

According to CSI’s appraisal, investors are waiting for share prices to fall to the lowest level to buy cheap shares, or waiting for the recovery in price to cut losses from buying expensive shares previously. However, market experts said that the prices of some shares on the market are now becoming lower, especially banking shares, leading investors to buy for their long-term goals.

 

A CSI official Mr Dao Duy Anh said that the reactions on the OTC market are always attached to the listed official market. In principle, the fourth quarter will be the prime time for the investors’ disbursement. In addition, the State Securities Commission (SSC), the Securities Custody Centre and the Hanoi Securities Trading Centre (HASTC) are speeding up plans to establish an OTC market for listed shares, a good sign for the prosperity of the market in the near future.

 

Duy Anh also warned that investors, if playing on the OTC market, should focus on to-be listed shares or shares with high liquidity such as shares of banking, oil and gas, and real estate sectors, or shares of well-known enterprises with good managing board and high business results compared with other companies in the same sectors. However, the most important thing is that investors need to build their own portfolio and investment criteria on the risky OTC market.