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I am a private investor residing in Singapore. I am interested in all kinds of markets and assets but my current views are that very few assets are currently undervalued at the moment. The only market that I know that is clearly undervalued with good/improving fundamentals is Vietnam. Therefore,... More
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Vietnam Stock Trading and Value Investing
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  • Saigon Hanoi Bank: Aggressive Growth

    Saigon Hanoi Bank (SHB) began as a very small, rural bank based in the Mekong delta region of Can Tho.

    They were previously known as Nhon Ai Rural Commercial Bank that focused primarily on servicing loans for agriculture and other rural banking services. It was only in 2006 when it was converted into an urban commercial bank and re-branded itself as Saigon-Hanoi Commercial Bank (SHB). In fact, SHB only opened its first branch in Ho Chih Minh City on 17 Oct 2006.

    After becoming an urban commercial bank, however, it has grown aggressively and in 2010, it had a total of 116 offices throughout Vietnam.

    Special Features of SHB

    The commercial groups backing SHB are the state-owned mining monopoly Vinacomin, Vietnam Rubber Group and T&T Group.

    I believe that SHB must have sacrificed credit quality in its quest for growth as I believe that its NPL is one of the highest among the listed banks.

    Other than commercial banking services, SHB has also funded some large (and fairly diverse) projects compared to its balance sheet, e.g., the "500 KW line Hiep Hoa Quang Ninh" valued VND 830 billion, indoor Stadium in Da Nang City worth VND 500 billion. Moreover, SHB provided $ 15 million for golf project of Vinacapital in Danang.

    In the beginning stages of growth, e.g., in 2007, it relied extensively on the interbank market (as opposed to customer deposits) for growth in the past few years, customer deposits have caught up somewhat.

    This bank also is quite aggressive in the use of its capital, investing in a great variety of businesses and holding a minority stake. Some examples are: SHB Vinacomin Insurance, Lilama-SHB investment and construction, Gentraco etc.

    Fee income has been traditionally insignificant for SHB. Only recently, the company has taken steps into the debit/credit card business.

    Financial Information

    I have financial information on the company only from the year 2006. This is the year where SHB was rebranded, changing its name and its business focus from that of a rural bank focused on agricultural related activities to a full commercial joint stock bank.

    If one looks at the profitability metrics of SHB, we can see that the bank is not particularly profitable, lagging behind many of the other more profitable banks like Military Bank and Asia Commercial Bank in most of the measures of profitability like ROA, ROE and NIM.

    Certainly, this is the price of growth. I believe that SHB, in the bid to grow as fast as possible, they must have tried many things to get more deposits from customers. Certainly these measures must have hurt their bottom line significantly.

    Growth Rate

    This is where things get interesting …

    At this rate of growth, I believe that SHB is right at the top as one of the fastest growing banks in Vietnam.

    Unlike banks like Asia Commercial Bank which has already matured, SHB is still in the fast growing stage of development. This is why you can see this fantastic rate of growth of the bank. I believe that comparing its total assets with the other more established players, SHB still has a few good years of growth ahead.

    Merger of Habubank with Saigon Hanoi Bank Before 2006, Saigon Hanoi Bank was a pretty insignificant bank. However, Habubank then was quite a good sized bank at that time. I still remember in 2004, when I was trying to decide which bank to buy on the OTC market, I had narrowed down to only 3 candidates and Habubank was one of these that I considered.

    But how things had changed. With the speed at which SHB grew, it is now in a position to buy over HBB.

    Of course, both HBB and SHB (and even the State Bank) had denied that the merger is going to through. However, looking at the trading pattern of the stocks of HBB and SHB, it certainly looks likely that both banks are going to merge.

    If this merger goes through, SHB will almost double their assets, putting them in the league of larger banks like Military Bank.

    This will certainly be a big boost to their expansion plans.

    Apr 16 12:19 AM | Link | Comment!
  • Asia Commercial Bank: Strength And Prudence

    Asia Commercial Bank (ACB) usually commands a higher valuation than that of the other banks due to its reputation, generally well deserved, that it is the best managed and most efficient bank in Vietnam. In addition, it is also known to be rather prudent in lending. Hence, it has the best asset quality and lowest rate of bad loans among the Vietnamese banks.

    The only problem for the bank are that it has just completed its aggressive growth phase and growth going forward will be slower than the other banks like Military Bank, Eximbank or Techcombank. In 2010, the company also lost a valuable stream of income from Gold trading floors when they were closed down.

    The other problem is that the foreign room of the bank is full so if you're not a Vietnamese, then very sorry, you cannot buy any shares!

    Financial Performance

    As you can see from the table above, ACB was able to maintain good ROA and ROE throughout the last 10 years of operation, even through the last 5 years which was bad from the economic point of view for Vietnam. Few banks in Vietnam have achieved this type of consistency in financial performance and this attests to the good management that ACB has.

    NIM is only average however. I believe this is because ACB has not been so aggressive like the other joint stock banks in opening new branches to actively woo depositors. Nevertheless, despite this, they were able to maintain good ROEs.

    One thing is that ACB actively sources for new sources of fee based income. Previously it operated highly successful gold trading floors but as the latter was closed by the government, they are now actively developing their credit card business.

    Growth Rates

    Growth rates are average when compared to the other Vietnamese banks that are listed. I believe that this is again due to the fact that the company has not been aggressive in opening branches. In addition they had been quite prudent in giving out loans as well. As such loan growth is moderate only when compared with other banks.

    Notwithstanding the fact that foreign investors are not able to buy shares of ACB, the share price had so far been stagnant because I feel that the company does not seem to be growing very quickly. Of course, there is no question that ACB is growing very prudently. Currently, ACB is one of, if not the most prudent bank in Vietnam.

    If we are in the heady days of 2007, I believe prudence will be in order. However, Vietnam as a country is growing very quickly as a whole and the market is coming out of a deep recession. In my opinion, now is the time to take a bit of risk for the chance to grow faster. I would favor a faster growing bank any day. In fact, I feel that at this time, a bank should be aggressively growing not only organically but also by acquisitions if necessary, to turbocharge their growth and take advantage of the cheap assets and bank equity prices now. There are banks still trading below their book values and well capitalized banks like ACB will be missing out if they do not take this chance to grow as fast as possible.

    In our next post, we will have a look at Saigon Hanoi Bank, a tiny bank compared to ACB with a less illustrious reputation but a far more aggressive (albeit less prudent) history of growth. If prudence is the watchword of ACB, Saigon Hanoi Bank will be growth.

    Apr 16 12:09 AM | Link | Comment!
  • How To Buy Vietnamese Stocks Directly

    This is a follow-up post to my previous article on my thoughts on the Market Vectors Vietnam ETF (VNM). The Vietnam ETF is a good trading vehicle for Vietnamese stocks but you got to time your entry and exit well. Like most of the ETFs that I know, these are trading vehicles that are mainly targeted at traders. If you are fast and able to spot the exact turning points in the sentiment towards emerging markets (EEM), VNM will be a good vehicle.

    However if you are really keen on investing in Vietnam and are a long term investor, it may prove to be worth your trouble to open a stock trading account and buy Vietnamese stocks directly.

    It is actually quite easy to buy Vietnamese stocks directly and it is not necessary to make a trip to Vietnam to do this. Any foreigner can do so by opening a stock account in a local brokerage firm without ever having set foot in Vietnam. In fact, there is a growing group of foreigners that have been investing in Vietnam. A recent article in the Vietnamese newspapers says this and I quote:

    Till March 31, 2012, Vietnam Securities Depository Centre (VSD) has granted transaction codes for 15,687 foreign investors, including 1,791 institutional investors and 13,896 individual investors.

    In March along, VSD has granted transaction codes for 54 foreign players including 28 institutions and 26 individuals.

    Vietnam Securities Depository Centre (VSD) is the central body that regulates the buying and selling of securities. In Vietnam, every investor has a unique trading code and is not allowed to have more than one stock account at any one time. Even institutions are not allowed to have more than one account each. Hence, it is easy to see how many foreign investors are there. If there are 15,687 transaction codes, then there are 15,687 foreign investors in total in Vietnam. Other unique aspects of the market I have addressed in this FAQ.


    First let's talk about taxes. There is a 5% tax on dividends. There is also capital gains tax. You can choose among two ways of paying capital gains taxes. You can either:
    1. Pay 0.1% of the value of each transaction, or;
    2. Pay 25% on annual profit at the end of the year.

    Obviously, option 1 is much easier to calculate so this is the option that most investors choose.

    There are many securities firms in Vietnam and new ones are being opened every so often. Competition among the securities firms is fierce. As a result, trading commissions are quite affordable, about 0.2% or so of the value of the trade and most firms will waive all other charges (e.g. account opening, custodian etc.). Currently, the stock market in Vietnam is very depressed and hence, the securities firms will be very grateful for your business and will likely provide you with excellent service. Usually this "service" will also include free tips on the various "hot" stocks. Obviously, I would not be able to give advice on how good these tips are however, so caveat emptor!

    I suggest that you stick to the larger securities firms in Vietnam as these companies have more resources and usually the internet trading platform will be less buggy.

    Shameless plug: In my blog under the title of "Brokerages", you will be able to find a list of brokerages that are available in Vietnam. Please note that I am neither affiliated to any brokerage firm nor am I recommending any of them just by listing their information on my blog.

    The list is certainly not exhaustive but I have tried to focus on the larger firms with the most resources. Hopefully you will find the list useful. Do check back often as I will add more firms when I find out more information about them.

    To open a trading account, there are only 2 steps:

    Step 1: Obtain a trading code at Vietnam Securities Depository Centre (VSD)

    Documents needed at this stage (securities firms will provide you with these documents) are:

    1. Account opening request in the securities firm that you choose (1 copy).
    2. Application for securities trading code (1 copy).
    3. Letter of good conduct/good standing (1 copy). This has to be certified by the Notary public and then legalized by the Vietnamese Embassy/Consulate in your country. If this is in English, a translation needs to be provided. This translation can be done and legalized in the Vietnamese Embassy/Consulate as well. (It cost me about USD10 nearly 10 years ago but I don't know how much it is now.)
    4. Photocopy of your passport (1 copy). This also has to be certified true copy by the Notary public as well.

    Step 2: Open a "Capital Contribution" Bank Account

    You should find out from the securities firm of your choice which bank they are affiliated to before opening a bank account. Theoretically, you can open a bank account in any of the many banks in Vietnam but usually securities firms have an arrangement with 1 or 2 banks that they prefer (indeed, some banks have securities firms that are their subsidiaries) and the account opening process/money transfer process could be expedited. Again, if the bank is "affiliated" to the securities firm, the latter will usually provide the necessary forms for you.

    1. Application for bank account opening (1 copy). This is a current account for the currency of your country of origin or in USD. This is the account that you will transfer money into when you TT funds to Vietnam.
    2. Application for "Capital Contribution Account" opening. This is denominated in VND. This account will be the one that transfers VND to your stock trading account.
    3. Authorization letter (2 copies). This instructs the bank to authorize your securities firm to transfer money into and out of your stock account under your authorization if you want to transfer money back to your home country.

    Most securities firms will just need a PDF copy of the above mentioned forms to be completed and emailed to them and they will process these for you. The other option is to snail mail the forms to Vietnam.

    That's all!

    Once the forms are received by your securities firm, they will check the accuracy and then commence the account application process. It usually takes between 2 weeks to 1 month for the entire process. Once this is done, you will be informed of your bank account, capital contribution bank account number and how to TT your funds to Vietnam. You will also be given a securities trading code and login ID/password to your stock trading account.

    Looking for Information on Companies

    Financial information on the companies listed in Vietnam is plentiful and available on request from the securities companies. Many of the securities companies have this information on their website as well. While there are translations available for some companies and there is a trend for some companies (especially big cap ones) to post their financial information and shareholder communications in English, most of the information will be in Vietnamese.

    I have included a translation of the most common financial terms that you will encounter in Vietnamese into their English equivalent in this document on reading Vietnamese financial reports. I trust that you will find it useful.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 10 8:02 PM | Link | 4 Comments
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