Vietnam’s Capitalism Learning Curve

Vietnamese authorities are disappointed by the results of this year’s initial public offerings of state-owned enterprises.  The companies were able to sell only 27% (84 million) of the more than 300 million shares offered –and foreigners bought only 10 million.  Proceeds totaled $49 million.

The lack of enthusiasm among investors is being attributed to the offerings being mostly companies doing public works business in the property sector that has experienced falling prices.  Also, Vietnam’s economic recovery has been relatively weak so far, and the government is not expected to boost public works spending.

But that doesn’t explain why investors are repelled by Vietnam’s state-owned companies at the same time they have driven up Vietnam’s stock prices by nearly 20%.

The explanation may be simpler:  The companies are pricing their shares higher than the market wants to pay for them.

Vietnam’s government will have more success privatizing their businesses once it fully accepts the way capitalism works.  In capital markets, the government doesn’t get to decide how much a company is worth; the market does.

When Vietnam lowers its expectations in pricing its IPOs, the country will successfully sell shares in the 432 state-owned enterprises scheduled to be privatized by 2015.

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