“Speculation” in advance

Some world news agencies have used the term “speculation” to talk about a quick purchase of shares of Vietnamese banks by some domestic and even foreign investors in the recent past.

Karl D. John, chief executive officer of the TCK Group, a Vietnam-based investment consulting group, in an article published on the Asia Times, said local investors are paying three to four times more than bank shares' face value with the hope of re-selling them to foreign investors after Vietnam joins the WTO.

Karl D. John said the speculation is running hot and some local investors have reportedly borrowed from the same banks to purchase their shares on the open market.

However, there is a possible risk that investors would withdraw if the selling price exceeds the face value. Speculation goes hand-in-hand with risk, as do banks’ operations with risk and profit.

Post-WTO focus

After reaching a trade pact with the US on Vietnam joining the WTO, US Senator Max Baucus outlined operations of US businesses in the country. They will focus their investment in insurance, telecommunications and particularly banking. The trade pact also touched upon ownership of shares by US investors in the banking field.

Some world news agencies have also given a hint of the possibility of strategic partnership among joint stock banks in Vietnam at the threshold of joining the WTO. It is likely that US-based Cathay Bank will buy more than 10 percent of shares from the Southern Bank, or a US partner will also buy shares from Eastern Asia Commercial Bank (EAB). In addition, City group also plans to enter into partnership with the Army Bank or The Bank for Foreign Trade of Vietnam (Vietcombank) in future.

The State Bank of Vietnam (SBV) is also completing the Banking Development Strategy till 2010 with a vision to 2010, highlighting the integration issue. Senior Economist of Banking Development Strategy under SBV Dr. Nguyen Dai Lai said international integration in general, or WTO admission in particular will ensure business rights for foreign banks and financial institutions in accordance with the signed international commitments. It is necessary to monitor the opening of foreign bank branches in Vietnam while showing encouragement and respect.

Foreign investment will be a highly competitive factor in Vietnam’s banking market in the post-WTO period. At such a time, it is normal for foreign investors to select a strategic partner to trade shares.