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Issue No. 37
October 2000
Our third year on the Internet

A Periodic Report to Our Clients

See VVG's  monthly feature on Current Economic Indicators

 DISPATCHES

STOCK MARKET REPORT:  We do not follow the daily trends of Vietnam’s new stock market for several reasons including, (i) the number of companies traded – 4 do date – is not an indicator of the nation’s business; (ii) the heavily regulated trading bracket and state-controlled reference price do not make performance a true indicator of real market conditions; (iii) there is not likely to be a meaningful change in the short term.  However, an examination of two weeks trading will give a clearer picture than any other.

 REE

 SAM

 HAP

 TMS

With increases and decreases in share prices still limited to 2% in either direction by regulation (down from the original spread allowed of + - 5%), the free market is not yet free in Vietnam.  With only four companies now trading, most of the other few that are qualified are reluctant to publish their results as mandated by regulations for trading. Reasons given are reluctance for competitors to see their details (showing the lack of sophistication of such managers and good reason for investors to stay away), or management’s desire to hide doctored performance numbers from their shareholders and the public.

 And yet, there are warnings now being published of a market correction, as prices increases are not related to company performance but only demand for participation in the exchange. Well that seems to be a good enough reason for share growth in other exchanges, and in fact is what a free market is all about.  But then this is only another demonstration of short experience and should spell caution to potential investors that government intervention to provide market corrections is to be expected.

 IPOs are the mainstay of “best buys” in every exchange but Vietnam’s.  Trade in Transimex Saigon was suspended for 16 days “due to their lower-than-real-value reference price.  Its opening price has been redetermined at VND 6,800 above its regulated par value of VND 10,000, and VND 2,800 higher than its pre-suspension ceiling price” reported Viet Nam News.

 As originally offered at VND 14,000 only 100 shares were sold at the August 4th inaugural trading session.  With the new, “real” reference price (that forms the bases for the initial + - 2% spread) set at VND16,800, trading resumed on 22 September, with only 100 shares being traded. Perhaps we missed the growth, or were these the same shares first sold on August 4^th?                                                                                                                                                                                 

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AUTO SALES:  Locally based JVs sold 8,200 automobiles, double the number for the same period last year, but this is not exacted to be sustained.  The new enterprises that formed as a direct result of the Enterpriser Law, allowing them to invest in cars, is the reason for the reported increase, as well as government enforcement banning unsafe vehicles.

 Average annual production of cars in Vietnam is about 10,000, which represents less than 10% of the industry-wide capacity.

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OIL AND GAS: New fields at the long awaited Block 15-1 were announced.  America’s Conoco, ROK’s KNOC & SK, and France’s Geopetrol said oil was detected in Black Lion IX with early tests showing a production capacity of 5,600 barrels, or 800,000 tonnes per day.  Vietnam plans to pump 17 million tonnes of crude this year, earning about $2 billion in exports, or 17% of the annual export turnover.

On the up-stream side of the market, our reporter visited the site being cleared for the Dung Quat Refinery, now known as VietRoss Refinery No. 1, near DaNang. It is quite a sight.  Dozens of trucks representing all decades of manufacture and origin, some as far back as the Japanese occupation forces in the 1940s, are hauling dirt.  The ground is level and the operation is as active as is a Stephen Speilberg movie set.  And that may also say something about the future use of the site.

There is not a pipe, a tube, or any other presence of what might be called an oil refinery in the making.  This is not to say that the Russian-Vietnamese team is not planning to build the refinery, but as the project is scheduled for operation by the [end of] year 2003, the presence of the structure is as difficult to see as is the financing and profitable operation of the plant difficult to envision.

It is reported that Fuji Bank of Japan signed an advisory contract with the Vietnamese Russian JV to help them learn where and how they might find $500 million to develop the scheduled $1.3 billion project.

As first envisioned, this was to have been a $1.2 billion facility built by Total of France, who pulled out when the site was moved from Vung Tau and the State would not agree to increase the funding to $1.5 billion as requested by Total.  The Vung Tau site is near the source of the oil while the Dung Quat site is near DaNang which is 700 km distant from the oil source and the two markets of Hanoi and HCMC.

Other consortiums were formed and pulled out until the VietRoss JV was formed pursuant to which each side agreed to contribute $500 million to the project and seek third party financing for the remaining funds.  We suspect the total funds will exceed the earlier sums asked by Total, and yet there is no one of economic authority who projects the refinery can be run profitably, particularly at the current price of crude oil. 

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TELEPHONY:  There are now over 3 million telephone subscribers in Vietnam, including landline and mobile (cell) phones.  The ownership rate is currently 3.8 per cent, or 3.8 people out of every 100 people based on a population of 78.9 million people.

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UNEMPLOYMENT COSMETICS:  Vietnam announced the “export of 50,000 workers and experts” beginning next year, elevating to from 150,000 to 200,000 by year 2005 to 2010.  By the end of the first decade of this century, the State hopes to have from “800,000 to 1 million laborers for export.” The workers will go to Asia, Africa, and the Middle East.

There are approximately 40.6 million people of working age in Vietnam, a nation of over 79 million people where 50% are under the age of 25. The number of people on the State payroll has been reduced from 14.7% to the current 9% or 7.1 million.  To account for the expected growth in the working population, there is a need to create 13.5 million jobs over the next nine years.

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YALY HYDRO PLANT:  Vietnam’s second largest hydro electric plant added its second 450 tonne turbine that alone will produce 4 million kWh per day, adding to the power generated from the first 450 tonne turbine commissioned this past May. The final two turbines are expected to be commissioned in April and October 2001, completing this $550 million project.

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1,000^th ANNIVERSARY CELEBRATION:  In preparation for the 2010 festivities, Hanoi on 8 October will start the 10-year countdown with fireworks shows banned since 1995. The month long celebration has encouraged the expenditure of $47 million to include restoration of historical relics and infrastructure improvements.

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