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BUSINESS IN BRIEF 4/4   2010-04-04 - VietNamNet

Securities firm buys into partnership

The southern bourse-listed Saigon Securities Co (SSI) has become a strategic shareholder of the Electronics Communication Technology Investment Development Corp (ELCOM) with the purchase of 1.52 million shares, equivalent to 8.58 per cent of ELCOM’s charter capital.

ELCOM enjoyed recent success with the issuance of 5.43 million shares, of which more than 1.84 million were allocated to existing shareholders in the form of a dividend payment in shares. More than 2.97 million shares were offered to strategic partners and 613,500 were reserved for the company’s key staff members.

Strategic partners SSI and SSI Vision Fund purchased 1.4 million of the 2.97 million offered, while SSI Asset Management Co Ltd (SSIAM) acquired 120,000. The DSCAP-SSIAM Vietnam Growth Investment Fund LLC, an offshore joint-venture unlisted-share investment fund between SSIAM and Japanese Daiwa SMBC Capital Co Ltd, purchased 480,000 shares.

After the shares were issued, ELCOM’s charter capital increased to VND177 billion (US$9.3 million).

As a strategic partner, SSI will support and consult with ELCOM on corporate management activities and participate in business development opportunities.

SSI yesterday closed unchanged at VND43,900 ($2.31) on a volume of 1,563,440 shares traded.

ELCOM, founded in 1995, operates in the fields of information technology, electronic telecommunications, automation and environmental engineering. It offers telecommunication software and equipment for network providers such as Vinaphone, Mobiphone and Viettel.

Last year, the company earned a net profit of VND88 billion ($4.6 million) and its earnings per share (EPS) was VND7,172 ($0.38).

ELCOM yesterday completed its list of shareholders to participate in the 2010 annual shareholders meeting.

Banks back away from high risk loans

Commercial banks are increasingly refusing to make loans for securities trading due to the high levels of risk.

"We are not passionate about securities lending and will not encourage this kind of lending in the future," said Asia Commercial Bank deputy director Nguyen Thanh Toai. "The securities market conceals greater risks than other sectors. That’s what we have learned in recent years."

Securities lending refers to loans made in which the lender accepts securities as collateral. Current regulations allow commercial banks to lend up to 20 per cent of their charter capital against securities collateral, but, in practice, banks are lending far less.

Some banks said they were turning away from this type of lending because most of such loans were just for short terms with an interest rate capped at 12 per cent per year. Meanwhile, banks were able to make medium- or long-term loans to consumers or to enterprises at negotiated interest rates, currently averaging over 16 per cent per year.

During the peak of the stock market rally in 2008, prior to the financial crisis, banks were freely making this sort of loan at 50-70 per cent of the market value of the collateral. Now, with stock values depressed, banks are willing to loan only 30 per cent of the collateral’s value.

"Securities loans are risky so we are cautious," said Vietcombank deputy director Pham Quang Dung. "But that doesn’t mean all stocks are chancy. For instance, we will lend up to 30 per cent of the value of the collateral if investors are mortgaging Vietcombank shares. Other stocks with high potential can also be considered."

The director of a Ha Noi-based securities company, who asked to have his name withheld, suggested that there were other factors besides risk deterring banks from securities lending.

"I know that some banks would lend against securities but they now find themselves short of capital," he said.

"It is difficult if you want to apply for loans directly from banks," added securities investor Quang Minh. "You should go to stock brokerages, which are themselves backed by major banks and which will give you the opportunity to engage in leveraged trading."

Viet Nam looks to take advantage of Japan trade treaty

Vietnamese businesses will continue to capitalise on a trade deal with Japan that took effect last year to boost exports to that market, business leaders predict.

Since the Viet Nam-Japan Economic Partnership Agreement came into effect in June 2009, reducing and eliminating tariffs on Vietnamese goods, seafood, textile and garment, and vegetable exports have been robust.

The Viet Nam Seafood Export and Processing Association said the tariff reduction has increased the competitiveness of Vietnamese products compared to those from other countries in the region.

Le Van Quang, general director of Minh Phu Seafood Joint Stock Co, said Japan did not buy much shrimp from Viet Nam in the past owing to high prices, preferring to import shrimp from Thailand and Indonesia.

But the tariff cuts have changed all that.

Japan is now Viet Nam’s largest buyer of frozen shrimp, with imports of US$400 million last year, or almost 30 per cent of all the shrimp the country exports.

In the first two months of this year, seafood exports to Japan were worth $89.7 million, 11.6 per cent higher year on year.

Vegetable exports to Japan have surged since the end of last year, with many Japanese importers seeking the Viet Nam Vegetable Association’s assistance to find sellers who can supply thousands of tonnes each month.

Huynh Quang Dau, director of An Giang Agricultural Technical Service Co, said so far this year, his company’s exports of taro, peas, and violet sweet potato have increased 30 per cent over the same period last year.

Vegetable exporters are very confident thanks to the impact of not only the tax cuts but also global economic recovery.

Japan is the third largest buyer of Vietnamese vegetables after only China and Russia.

The textile and garment sector is also stepping up exports to Japan.

Sai Gon 3 Joint Stock Co said it has signed contracts worth $50 million to export 6 million pieces to that country.

Pham Xuan Hong, the company’s chairman, said Japanese orders are up 20 per cent over last year.

Under the trade agreement, Vietnamese textile and garments can enter Japan tariff-free. The tax rate used to be 10 per cent until the treaty took effect.

"Opportunities are huge if businesses choose the right partners," Xuan said.

Diep Thanh Kiet, chairman of the HCM City Garments, Textiles, Embroidery and Knitting Association, said young Japanese consumers prefer fashionable products and diverse designs.

The Viet Nam Textile and Garment Association said it recently joined an ASEAN project that seeks to establish close links among the member-countries’ textile and garment industries and promote exports.

VN exhibits goods in Cambodia

A fair showcasing high-quality Vietnamese products and exports will take place in Phnom Penh from today until Wednesday.

The fair, the ninth of its kind, is not only for trade promotion but also for Vietnamese businesses to showcase the quality of their products in the neighbouring market.

Business Studies and Assistance Centre director Vu Kim Hanh said this year’s event was expected to attract a larger number of entries than previous years.

Various cultural, sports and social activities will be held on the occasion, such as art performances and the provision of free medical checks-up and medicines for the poor in Phnom Penh, Kandal and Takeo provinces, Hanh said.

As part of the fair, Cambodian distributors and agents will meet with producers and entrepreneurs from Viet Nam to seek partnerships and increase Vietnamese investments in the country.

Cambodian commercial counsellor in Viet Nam Yea Kim Hen said Viet Nam now had an opportunity as Cambodian consumers were shifting from Thai to Vietnamese products.

The market share for Vietnamese goods in Cambodia had climbed by 40 per cent over the past three years with aquatic products, construction steel and processed farm produce taking the lead.

Viet Nam’s exports to Cambodia include instant noodles, plastics products, cigarettes, confectioneries, maize seed, home appliances, fruits and vegetables, construction steel, agricultural machines, fertilisers, pesticides, consumer goods and processed farm produce.

Viet Nam imports mainly garment materials, automobile spare parts and wood and rubber from Cambodia.

The two countries have set a target of US$2 billion in two-way trade this year.

High energy prices force cost of construction up

Prices for cement, iron and steel are expected to continue upwards this month over March as a result of price increases on input products, according to the Ministry of Finance’s Price Control Department.

The price of steel rose by VND1.5-2 million (US$79-105) per tonne in March to VND14 million ($737) as a result of the 6.8-per-cent increase in the price of electricity, said the Viet Nam Steel Association.

The increase would continue this month because material suppliers from Australia and steel producers in Viet Nam announced they would increase the price of iron ore, which is used to make pig-iron, by $70-80 per tonne against February, the association said.

The price would also go up this month because it was the middle of the building season and demand was higher, it said.

The Price Watch Department said the price of domestic steel might stabilise in June. Meanwhile, the price of cement would increase by VND50,000-70,000 per tonne this month to VND1 million -1.47 million against March, the department said.

To ensure balanced supply and demand for cement on the domestic market, the Ministry of Construction has requested the Viet Nam Cement Corporation and other cement producers to supply enough cement to meet the demands of the southern market.

Decree helps firms go legal

Ideas to help enterprises abide by business law were debated at a conference this week, organised by the Viet Nam Chamber of Commerce and Industry in collaboration with the Central Institute of Economic Management.

The ideas will be used to revise a decree which aims to help State agencies, investors and businesses apply the law with less risk.

Chamber law department head Tran Huu Quynh said the current decree had helped implement the law but issues had arisen over the past four years that required more specific instructions.

Nguyen Thi Mai, from Asia Law Company, said there were problems implementing the law.

"I think it is necessary to revise both the Business Law and the Investment Law to avoid a patched up situation. It is not enough to revise only the decree," Mai said.

Institute deputy head of Business Environment and Competitive Capacity Department Phan Duc Hieu emphasised the rights of shareholders to complain or sue members of management boards, directors and general directors.

He said shareholders or a group of shareholders who hold at least 1 per cent of popular shares for a period of continuous six months should be able to ask their management board to sue the above people if they used their company’s information, know-how and business opportunities for their own benefits or to serve other companies or individuals.

That would also apply to members of management boards or directors who took advantage of their positions or their company’s assets for their own benefits.

Lawyer Cao Ba Khoat, from K Business Advisory and Collaborators Company, drew attention to the application of Decree No 71 and WTO commitments. The Decree had caused differences as it allowed limited and joint stock companies to hold a minimum 51 per cent of shares instead of 65 per cent stipulated in Business Law.

"The application of 51 per cent or 65 per cent is not the same. In reality, listed companies could not call for the rate of 65 per cent at their first general shareholders assembly. They often have to organise a second one," Khoat said.

He added that the situation had caused a waste to both businesses and society.

VN Index closes up for new month
The VN-Index gained 0.45 per cent yesterday to close at 510.48, as the Government, in its monthly cabinet meeting on Wednesday, called on the State Bank of Viet Nam to extend its negotiable interest rate policy to short-term loans to businesses.
State Bank deputy governor Nguyen Dong Tien said that the central bank was working on the issue under Government guidelines.

The value of trades on the HCM City Stock Exchange yesterday fell to VND1.75 trillion (US$91.6 million) on a volume of 43 million shares.

Lam Dong Mineral and Building Materials Co (LBM) became the most-active share on the day, with 1.6 million traded, receiving a boost from a market prediction that building materials prices would rise this month, as well as its own announcement of a 7-per-cent dividend on April 22, said Le Tuan Anh, head of market analysis with a HCM City-based securities firm.

On the Ha Noi Stock Exchange, the HNX-Index advanced by a modest 0.18 per cent yesterday, ending the day at 164.11. Trading volume rose slightly to 24.7 million shares, worth a total of over VND853 billion ($44.9 million).

PetroVietnam Construction (PVX) was the most-active stock on the northern bourse, responsible for 1.7 million shares changing hands.

Foreign investors turned out to be net sellers by volume on the Ha Noi exchange of 34,800 shares but were net buyers by value of VND2.8 billion ($147,368) worth of shares. They were net buyers on the southern bourse of 3.3 million shares worth a total of about VND24.5 billion ($1.29 million).

"The beginning of April is always the time for investment funds, especially foreign funds, to begin new disbursements after the fiscal year ends in March," said Nguyen Huy Duong of Hoa Binh Securities Co, noting that information on the activity of foreign funds remained hard to verify.

Wood product exports up 16.3%
Exports of wood products in the first quarter of the year went up 16.3 per cent against the same period last year with a turnover of US$655 million.

Nguyen Ton Quyen, deputy chairman of the Viet Nam Timber and Forest Products Association (Vifores), said exports were still focussed on three major markets – the US, EU and Japan.

However, exports to the US market have not increased much as the importers in that country have not overcome the global recession, Quyen said.

Last year, the wood product imports by the US – Viet Nam’s largest importer – reduced by 15 per cent against 2008. US firms also reduced the price of imported wood products by 10 per cent, he said.

Viet Nam exported only $700 million worth of wood products to the US in 2009 compared to $950 million in 2008.

Quyen said Vietnamese wood product exporters since this month will have to conform to the US’s Lacey Act, which requires all imported wood products to have certification of legal exploitation of timber.

Since late last year, wood product exporters have tried to find new markets, but it is not an easy task, they say.

"Last year, Vifores and some wood product exporters surveyed the Belgium market with the aim of setting up a customs warehouse for our products in Belgium," Quyen said.

Despite Viet Nam meeting the legal requirements to set up the customs warehouse, the plan has not been implemented because the Vietnamese side was not geared to handle the task, he said.

A warehouse in Belgium would facilitate the export of Vietnamese wood products to Europe which holds great potential, Quyen said.

Tran Quoc Manh, chairman of the Sai Gon Trade and Production Development Corporation (SADACO), said the country targets exporting $3 billion of wood products this year, up $400 million against last year.

However, this was difficult to achieve the target if comprehensive measures were not taken to improve product quality and implement effective marketing campaigns, he added.

Wood products exporters were having expectations of exporting to new markets, Manh said.

Russia, for example, was considered a market with high potential to import Vietnamese wood products, he said.

However, export promotion activities to this market had not been implemented effectively.

Manh said that without the Government’s support, wood product exporters by themselves could not carry out effective export promotion campaigns.

New electricity company to boost services 

The Northern Power Corporation (NPC) made its debut yesterday as the sole provider of electricity to 27 cities and provinces in the north and north-central regions of Viet Nam.

The NPC, an affiliate of the Electricity of Viet Nam, was formed through the restructuring of Electricity Company No 1 and three electric companies from Hai Phong city and Hai Duong and Ninh Binh provinces.

The establishment of the corporation is part of the Government’s efforts to help increase transparency in the electricity sector.

Speaking at the debut ceremony, Deputy Prime Minister Hoang Trung Hai said the new model would create favourable conditions to improve customer service and develop the electricity market. The corporation plans to expand its 110kw and lower voltage grids from 14 per cent to 17 per cent in the next five years to meet the increased consumption needs. It also plans to diversify its business by investing in telecommunications, tourism and financial services.

PV Shipyard upgrades oil rig

PetroVietnam Marine Shipyard Company (PV Shipyard) recently completed the upgrade of the offshore resolute oil rig and handed it over to the US company, Scorpion Offshore.
The American Bureau of Shipping inspected the rig and no comment was made, PV Shipyard reported.

PV Shipyard was established in 2007.

Binh Duong attracts top foreign investment

The southern province of Binh Duong received US$312 million of foreign direct investment (FDI) capital in the first quarter of this year.

To date, the province has attracted 1,922 foreign invested projects worth $13 billion including those in the industrial zone with a total capital of $7.151 billion.

Domestic investors have also invested VND60.72 billion ($319.5 million) in Binh Duong Province.

Paper consumption rises in first quarter

The Viet Nam Paper Corporation announced that about 55.2 million tonnes of paper products were consumed in the first quarter of the year, up 16.7 per cent over the same period last year.

The industrial production value was estimated at VND628 billion (US$33 million), up 22.6 per cent against last year.

Paper industry enterprises have also developed rapidly with production investment projects like Phuong Nam Pulp Factory and Kon Tum paper factory designed to expand production and increase sales.

Indian diplomat moots business co-operation

Outgoing Indian Consul General Jitendra Nath Mishra on Wednesday mooted the idea of Indian and Vietnamese businesses co-operating with each other in investing in neighboring countries like Laos.

Mishra, who has been appointed Indian Ambassador to Laos, said during a farewell meeting with the press that Indian firms could also use Viet Nam as a hub to expand their activities in the region.

The consul general lauded the constantly strengthening political and economic ties between India and Viet Nam.

Apec Securities to listshares in Ha Noi

APEC Securities Co has received in-principle approval to list 26 million shares on the Ha Noi Stock Exchange. The brokerage has targeted a profit this year of VND70 billion (US$3.7 million). It has a charter capital of VND260 billion ($13.7 million) and will hold its annual shareholders meeting on April 3, at which it will vote on a plan to increase its charter capital to VND403 billion ($21.2 million).

Vipco Petroleum Transport to issue bonds

Shareholders of Vipco Petroleum Transportation (VIP) have approved the company’s plan to issue VND300 billion (US$15.8 million) worth of bonds this year.

The company will also invest an additional VND100 billion ($5.3 million) in the VP Petrochemical Transportation Co, increasing its stake to 35 per cent. Vipco will pay a 6-per-cent dividend on 2009 profits on April 20, closing the registration period this Friday for participation in the dividend payout.

Dana-Italy Steel Co applies for listing in Ha Noi

Dana-Italy Steel Co has applied to list 15 million shares on the Ha Noi Stock Exchange. The construction materials maker, located in the Thanh Vinh Industrial Zone, has a charter capital of VND150 billion (US$7.9 million).

VNDirect Securities Co to issue 55 million new shares

VNDirect Securities Co will offer 40 million additional shares to existing shareholders at a price of VND10,000 per share, and will issue a dividend of 15 million shares to existing shareholders at a ratio of 3:1.

This brokerage will also issue VND100 billion (US$5.3 million) worth of convertible bonds at no less than VND200,000 per bond as part of an overall plan to scale up its charter capital this year from VND450 billion ($23.7 million) to VND1 trillion ($52.6 million).

World Bank offers Viet Nam science-technology help

The World Bank (WB) will help Viet Nam in the field of science and technology, said WB Vice President Janamitra Devan at a meeting with Deputy Prime Minister Nguyen Thien Nhan in Ha Noi yesterday.

At the meeting, Devan said that the bank would help the country organise a conference on taking advantage of state-of-the-art technologies this year, and work with Vietnamese to design a project on the issue.
For his part, the Deputy PM spoke highly of the WB’s assistance, especially in science and technology, supporting the country’s socio-economic development.

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