A two-year lull in Vietnam’s IPO market may be finally coming to an end.
Initial public offerings in the country are expected to pick up in 2021 as the pandemic subsides, and certain regulatory bottlenecks are removed soon.
The ball has already been set rolling by several small listings since the start of the year.
IPOs in Vietnam in 2021
|Company||Sector||Foreign institutional investors||Current valuation||Growth since debut||Date of IPO/listing|
|Orient Commercial Bank||Banking||Aozora Bank, VinaCapital||$1.1B||28%||January 28|
|Dat Xanh Service||Real estate||--||$450M (planned)|
|Khai Hoan Land||Real estate||--||$200M (planned)|
|Thai Nguyen International Hospital||Healthcare||--||$48M||-10.8%||January 6|
|ICCO 40||Construction||--||$5.5M||92.3%||January 27|
|Dai Viet Paint Group||Manufacturing||--||$3M||12.6%||January 14|
|ABBank||Banking||Maybank, IFC||$424M||--||Planning to list on HCM Stock Exchange in 2021|
|NamA Bank||Banking||--||$295M||--||Planning to list on HCM Stock Exchange in 2021|
|Valuation as on April 29, 2021|
In contrast, Vietnam witnessed no IPOs — even though there were about a dozen direct listings — in 2019, noted Deloitte’s Southeast Asia IPO market 2020 report. Last year there was one IPO — that of the Hanoi-based logistics firm ASG Corp, which raised a modest $9 million, show public records.
The ASEAN region, meanwhile, saw 114 IPOs last year — down from 47 in 2019. The listings raised a combined $7 billion in funds, the same as the previous year, implying that more large-cap companies with higher valuations are coming to the market.
Only two years ago, Vietnam was the most vibrant IPO market in the region.
In 2018, firms had raised $4.6 billion from 33 market listings, including mega offerings such as residential property developer Vinhomes’s $1.3 billion IPO and Techcombank’s $923 million equity issue.
And then the silence began.
“Within ASEAN, the scale of the Vietnamese stock market is still small. So, after the peak in 2018, the slowdown was understandable,” said Pham Luu Hung, head of SSI Research at SSI Inc, the country’s largest brokerage house.
The pandemic, too, played a role. “COVID-19 put the listing plans of many companies on hold,” said Cuong Dinh Tran, the country managing partner of Ernst & Young Vietnam.
At the peak of the health emergency, the VNIndex — the benchmark index of the Ho Chi Minh City Stock Exchange (HOSE) — dipped to 650 points in April 2020 from nearly 1,000 points at the beginning of the year. As a result, local businesses sought fundraising alternatives such as bonds, according to Hung.
Adding to the plight was a new regulation, announced in November 2020, regarding the privatisation of state-owned enterprises (SOE), locally referred to as Decree 140/2020/ND-CP. The rule concerned an August 2017 plan to privatise 128 public companies in 2017-2020.
The government’s divestment plan, however, has progressed only in fits and starts due to various reasons.
SOEs cannot be privatised in the absence of detailed instructions documents. “There haven’t been guiding documents to give detailed instructions regarding the decree,” said Hung.
The law also has cumbersome clauses such as the one requiring a business to become more transparent in evaluating the land it owns. This was introduced to make land management transparent after the government detected some land use violations in several companies, such as the beer maker Sabeco.
“Some norms of the decree lengthened the enterprise evaluation process, especially when it comes to land ownership,” Hung added.
Moreover, there are no guidelines for SOEs that had their privatisation plans approved before the decree was announced. Due to these roadblocks, nearly 90 SOEs have not met the government’s privatisation target, as of end-2020, according to the country’s ministry of finance.
“Further, 2020 was an election year for Vietnam, which led SOEs to delay privatisation,” Tran pointed out.
This delay has hurt the IPO market as many of these companies were to be divested through stock market listings. The “unprivatised” SOEs were anticipated to generate a 40 trillion dong pipeline ($1.74 billion) in 2021, the finance ministry’s corporate finance department told local media recently.
Another drag on IPO sentiment is competition. “Vietnam’s local bourses [HOSE and the Hanoi Stock Exchange] are also competing with global stock exchanges,” Tran asserted.
Companies that recently trumpeted their intention to seek an overseas IPO include Vingroup automaker VinFast that said it is considering a SPAC transaction, and property firm FLC’s airline unit Bamboo Airways looking to list on the New York Stock Exchange.
“The problem was in the supply side, investor demand on the stock market was still there,” Hung explained.
Once these hurdles are cleared, capital influx is expected to return in a big way, according to experts.
“There is still a sizable pool of private enterprises in Vietnam that saw good valuation growth since mid-2020,” added Tran. These IPO aspirants will be on the lookout for an opportune time to go to market as they seek access to capital, boost liquidity, and drive growth, he affirmed.
In terms of SOE listing, Hung expected that the regulation issue will be sorted out soon so that the privatisation of these assets during the 2021-25 period will be carried out more practically. Once the instruction documents are there, it’s expected that SOE privatisation will be expedited.
“We hope IPO activities within the next 12 months will be quite robust,” Tran said.
The finance ministry said major IPOs such as that of Agribank, the country’s largest bank in terms of assets, and telecom service providers MobiFone and VNPT, were slated for this year.
The recent stock market rally — the VNIndex has risen 67% in the past 12 months — is favourable for IPOs, according to Hung.
The HOSE had a $194 billion market cap as of end-March, while the Hanoi Stock Exchange had a $14.7 billion market cap.
In February, Vietnam established the Vietnam Stock Exchange as a parent company to govern the two bourses. “It will streamline the management system, and the criteria for listing, reporting, and disclosing information,” Deloitte analysts said in their report.
The government’s stellar COVID-19 response will spur to the quickest economic recovery in the region, analysts said. This, too, will rub off on the country’s IPO market.