Tuesday, 7 December 2010

Vietnamese Stock market: are there any opportunities for long term investments?

Last update 22/11/2010 09:34:09 PM (GMT+7)

Stock market: are there any opportunities for long term investments?
VietNamNet Bridge – The sickly stock market has been testing stock investors’ patience for many months. Other stock markets have recovered but when will Vietnam’s stock market bounce back?

PVGas could only sell 64 percent of the volume of shares it offered at the IPO (initial public offering) on November 17. The IPO average price of PVGas’ share was 31,000 dong per share.

Becoming shareholders of the enterprise which is leading Vietnam’s gas industry, the key industry in Vietnam’s national economy which decides the development of other industries such as power, fertilizer and steel, is really the dream of many investors. Andy Ho, Investment Director of VinaCapital, said that becoming the “owners” of state-owned general corporations is a golden opportunity which does not come regularly.

However, contrary to previous thoughts, the shares were not selling like hot cakes. Of the 1057 investors who successfully bought the stakes, 12 institutions and 1045 individuals bought 4.244 million stakes out of nearly 61 million of stakes sold.

Money exhausted

A lot of companies reported they could sell only 6-10 percent of the volume of stakes offered. At a recent auction of 7.32 million stakes of a LPG firm in the north, only five individual investors registered to buy 0.6 percent of the volume of shares.

According to Huynh Anh Tuan, General Director of SJC, as money is becoming scarcer investors are becoming more cautious with their investment decisions.

Cash is not flowing into the stock market because of many reasons. Tuan said that there are not many expectations on medium term investments, because the market is still awaiting macroeconomic problems to be solved, including the gold and dollar price fever, and it is still awaiting information about the consumer price index (CPI) in November. The increasing bank interest rates have been creating difficulties for enterprises while investors dare not borrow money and mortgage their shares for the loans.

Many enterprises have licenses to issue shares to increase their chartered capital. However, the enterprises still cannot fix the list of shareholders, because shareholders do not want to spend more money on stakes.

Are there any opportunities?

According to some securities companies, institutions and funds have planned for the disbursement. In October, for example, VF1 fund disbursed, lowering the cash proportion from 10 percent to 7 percent of NAV, and sold all the bonds in its investment portfolio. VF4 also disbursed, while the proportions of cash and other assets have decreased from 7.2 percent to 2.4 percent.

According to Tuan, domestic institutions have disbursed because of the cheap stocks, but they also can see the uncertainties.

“At this moment, they dare not spend too much money. The main force in the stock market is individual investors who account for 80 percent of the trading volume,” he said.

So far this year foreign investors’ net sale has reached over 10 trillion dong or 500 million dollar. According to Au Viet Securities Company, the figure is not big, because in the first quarter of 2008 alone, they incurred a loss of up to $1.3 billion.

Why do foreign investors keep purchasing? According to AVSC, foreign investors always target long term investments (3-5 years), and it is still early to explain their investment strategies.

The advice for investors is to maintain high proportions of cash. However, some analysts believe that if investors have idle money, they should think of medium term investments, because they can expect opportunities when the cash flow of $600 billion is pumped into the US economy and a part of the sum may flow to Vietnam.

Source: Saigon tiep thi


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