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Vietnam IPOs: From pipe dreams to pipeline

Vietnam’s market is small at some 4% of GDP but it is not likely to remain that way for long. As irreversible economic reforms take hold and the government continues to privatize state assets, a lengthy pipeline of IPOs is emerging that promises to dwarf the existing market.

Buckle up and proceed with caution “The privatizations really started to pick up steam in the third quarter of last year,” says Tung Kim Nguyen, chief operating officer of local asset manager and securities company Indochina Capital in Saigon. “It’s been an assembly line. They don’t just come once, they do another [issue] and another.”

In fact, the so-called IPO market is really a unique two-stage process that entails state assets being incorporated in a process known as ‘equitization’. Shares in equitized state companies are usually sold to the public and institutional investors in an auction process conducted on an over-the-counter market. In the past, many of these companies might have remained unlisted for some time. When they do list, most have taken place as introductions rather than capital-raising exercises, one reason why the OTC market is valued at multiples of the official listed bourse.

That is beginning to change as the government pushes privatizations into near simultaneous equitizations and listings in an effort to formalize the market. Standard IPOs will probably eventually become the norm in Vietnam, something that excites Tung. “All the really big guys haven’t come to market yet.

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