The peak in banking market of Vietnam in the middle of 2000s could
be considered a result of the development of stock exchange market and the
participation of the foreign banks in domestic market. In my view, there were 3
main reasons:
Firstly, shares of
banks were always on top of the market, in terms of both price and value,
causing a higher demand and consequently a desire to pump more and more into
the market. Therefore, investors who had much and much money wanted to open
their own banks, while current banks issued new shares to increase capital.
Secondly, many
firms started in the market with market value at only dozens of billions VND, suddenly
climbed up at thousands (or even dozens of thousands) of billions VND. It
created a huge excess capital that allowed firms to open their own banks,
although their specialisation are ship-building, oil or textiles.
Thirdly, many
domestic bankers predicted that foreign banks would join the market and
probably acquire the domestic banks. Thus they built their network as wide as
possible, increase their capital as high as possible, hoping for a dream price
of the acquisition.
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