February 2, 2018 / 3:16 AM / 10 months ago

Breakingviews - Vietnam’s Thatcherism could use an extra push

People walk past the stock exchange centre in Hanoi, Vietnam January 26, 2018. REUTERS/Kham

SINGAPORE (Reuters Breakingviews) - Vietnam’s Thatcherism could do with fewer Hanoi characteristics. The sale of a 20 percent slug of state-controlled electricity provider PV Power is the country’s latest successful privatisation. Stake sales are going gangbusters, as is the local stock market. That makes it easy to refrain from enacting deeper reforms, but they would help sustain the momentum.

Asia’s fastest-growing economy logged 7.7 percent year-over-year growth last quarter. The ruling Communist Party is embracing freer trade and the reduction of the state’s role in everything from beer to petrol stations. It’s less Karl Marx, and more Margaret Thatcher in 1980s Britain.

The sale of brewer Sabeco in December was a watershed moment. Almost a decade after an initial public offering and a year after a tiny piece was listed – the two processes are separate in Vietnam – the government sold 54 percent to Thai Beverage for $4.8 billion. A valuation of about 40 times expected earnings is encouraging more similar deals.

In January, pieces of national energy champion PetroVietnam were sold. Anticipation is mounting for what could be more chunky sales, from mobile operator MobiFone, Heineken partner Saigon Trading Group, and Saigon Tourist. According to RongViet Securities, 70 percent of 271 divestments scheduled for 2018 to 2020 will take place this year.

All of this has occurred amid a corruption crackdown extending into the upper echelons of Vietnam’s political hierarchy, which has not dimmed Hanoi’s resolve. Worries about the impact of rising rates and debt also have not dampened enthusiasm on the Ho Chi Minh Stock Exchange.

A two-day outage last week due to technological malfunction, however, was a timely reminder of just how young the system is.

The government has been steadily making changes. It closed a yawning gap between IPO and listing. Hanoi also now allows underwriters to gauge demand in a so-called book-building, when selling state assets. It has not yet used the new tool in privatisations, and could stick to auctions.

Codifying the Western-style approach might lead to fewer sky-high price tags that risk limiting future sales and more balanced shareholder registers. Securities-law revisions due by 2019 covering everything from exchanges to governance should help, too. Vietnam would be wise to avoid letting short-term exuberance get in the way of longer-term benefits.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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