Vietnam's biggest dairy products company is set to become the first company from the country to list overseas by floating 5 per cent of its shares on the Singapore stock exchange by the end of the year.
Vinamilk, the second-largest firm listed on the Ho Chi Minh City Stock Exchange, said it would offer 8.85m new shares in Singapore but did not say how much money it expected to raise.
Mai Kieu Lien, chief executive, said the overseas listing must be approved at a shareholders' meeting on March 31. With the company 50.1 per cent state-owned, Hanoi should not face any practical obstacle to proceeding. However, some investors warned the move could prove detrimental to the seven-year-old local market, especially if other companies follow suit.
"I don't think it's a positive for the company or the development of the domestic market," said John Shrimpton, a director at Dragon Capital, a boutique Ho Chi Minh City-based investment bank.
"When you are sitting here in Vietnam now, there is this idea that it burnishes international credibility [to list abroad]," Mr Shrimpton said. "But the net effect is [the] reduced liquidity of the shares that trade domestically, which, if it becomes a trend, has a deleterious effect on the development of the capital markets."
The plan follows the wooing of Vietnamese authorities by stock market officials from Singapore, Hong Kong, Seoul and even Prague, all of whom are eager to benefit from investor enthusiasm for companies from one of Asia's fastest-growing economies.
Kevin Snowball, a director at PXP Vietnam Asset Management, said Vinamilk was "testing the waters" to assess the reception for Vietnamese companies in foreign markets, though he said it was "pretty expensive" for the company.
"The Vietnamese authorities have had people knocking on their doors telling them what a good idea it would be to list their companies on a proper exchange," he said. "It is our opinion that Vietnam is developing into a proper exchange itself and doesn't really need this."
Singapore, which had recently struck an exclusive deal with Hanoi to help modernise its stock exchange, is eager to attract more foreign listings to reduce its dependence on medium-sized Chinese companies, which account for about 100 of the 700 companies listed on the exchange.
Yet it remains to be seen whether Singaporean investors will be as enthusiastic about the company as investors at home. Vinamilk is trading on the domestic stock exchange at a price-to-earnings ratio of 43 times 2006 earnings, and 32 times projected 2007 earnings. Vietnam's stock market rose 144 per cent in 2006 and is up another 50 per cent this year, triggering a frenzyfor stocks that has alarmed the communist authorities.
Additional reporting by Sundeep Tucker in Hong Kong
