December 27, 2007 / 2:29 AM / 11 years ago

UPDATE 2-Vietcombank IPO raises $652 mln, market cautious

(Recasts to add details, market reaction)

By Nguyen Nhat Lam and Ho Binh Minh

HANOI, Dec 27 (Reuters) - Vietcombank raised $652 million this week in the first share sale of a state bank in communist-ruled Vietnam but investors warned the deal will face its real test when the shares starts trading on the market.

The delayed initial public offering comes at a volatile time for investors in Vietnamese shares, with the main stock market index .VNI more than a fifth below a record set in March and down 16 percent over the last eight weeks.

Valued at around $10 billion, Vietcombank is the biggest Vietnamese firm to conduct an initial public offering. The move is part of a government drive aimed at opening its banks to capital markets, with listings of four more state-run commercial banks scheduled for the coming year.

However, investors and stockbrokers were cautious on the prospects for Vietcombank shares.

“We should wait to see in the next few weeks if all the winning bidders actually take the shares or give up their deposits,” Nguyen Chi Trung, head of brokerage at Ho Chi Minh City-based Viet Dragon Securities Corp, told Reuters.

Trung said if the market were to rise at the start of the year investors would hang on to their Vietcombank shares but would likely refuse them if the market continued to slide.

The VN Index lost 0.3 percent to end at 921.75 points on Thursday. The index has gained 23 percent this year.

Vietcombank, or the Bank for Foreign Trade of Vietnam, sold 97.5 million shares, 6.5 percent of the bank, at an average price of 107,800 dong ($6.69) each, above a starting price of 100,000 dong, the Ho Chi Minh Stock Exchange said.

BRANDING VALUE

Investors had expected a starting price of up to 80,000 dong.

“The high pricing has included the value of Vietcombank’s branding,” Viet Dragon’s Trung said. The bank handles the majority of Vietnam’s trade payments.

Initial public offerings and stock market trading debuts are separate affairs in Vietnam, and Hanoi-based Vietcombank plans a Ho Chi Minh City listing by the end of March next year. It also plans to list its stock in Hong Kong or Singapore in 2009.

Nearly 9,500 investors, including 252 foreign firms and individuals, had sought a combined 122.2 million shares. Foreigners now own 1.92 percent of the bank, having bought 28.7 million shares at the auction.

In addition, Vietcombank will choose up to two foreign strategic investors to help it expand into investment and retail banking. Credit Suisse CSGN.VX is advising it on that deal.

The bank is among the five state-run commercial banks ordered by the government to sell shares to the public and list on the exchange as the country realises its World Trade Organisation commitments to open the banking industry.

Vietcombank’s IPO had been delayed as the government was worried that a glut of supply would slow the small but fast-growing stock market.

Foreign banks, including Australia’s ANZ (ANZ.AX) and Britain’s HSBC (HSBA.L) (0005.HK), have bought stakes in Vietnamese banks as they are looking to benefit from the country’s fast-growing economy.

Vietnam has a population of 86 million but only 5 million bank accounts. Officials expect annual deposit growth of about 22 percent to $100 billion by 2010 from $36 billion in 2006. ($1=16,113 dong) (Editing by Jan Dahinten)

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