Listing abroad not easy for local firms, insiders say
Last updated: Saturday, October 10, 2009 |
VnnNews - Listing procedures have proved difficult for Vietnamese firms aiming to sell shares on foreign stock markets.
The Hanoi-based infrastructure developer Cavico Corp. completed a “hard journey” in meeting all the requirements to become the first Vietnamese firm listed on the US national securities exchange NASDAQ last month, Chief Executive Officer Bui Quang Ha said.
“The listing procedure was a rigorous process, specifically the due diligence conducted by NASDAQ,” Ha said in a statement following the listing on September 18.
He said the company had consulted with the New York-based full-service investment bank Rodman & Renshaw LLC during the application while leading US law firm Sichenzia Ross Friedman Ference LLP represented Cavico during the process.
Cavico shares had been traded on the US OTC Bulletin Board under the ticker symbol CVIC before it was listed on NASDAQ, the largest US equities exchange.
“Following a comprehensive evaluation of all US exchanges, we determined that the NASDAQ Capital Market was the best fit for Cavico Corp.,” Ha said in the statement.
Trading of Cavico’s common stock commenced September 18 under the ticker symbol CAVO.
Founded in 2000, Hanoi-based Cavico Corp. focuses on large infrastructure projects, including hydropower facilities, bridges, tunnels, roads, and mines.
The PetroVietnam Finance Corp. (PVFC), a unit of Vietnam Oil & Gas Group, is now finalizing the documents needed to list on the Singapore Stock Exchange (SGX).
The company hopes to list during the second quarter of next year as Vietnam’s first credit organization listed abroad, Tong Quoc Truong, general director of PVFC, told Thanh Nien.
PetroVietnam, as the parent company is known, owns 78 percent of PetroVietnam Finance, which is the second-largest listed company on the Ho Chi Minh Stock Exchange.
Truong said the listing aimed to make the company brand known internationally, to mobilize funds from foreign investors and to expand its business across Asia, starting with Singapore.
Though advised by Morgan Stanley, a market leader in securities, Truong said it had been hard for the firm to fulfill all the listing procedures.
“There’re so many procedures that we’re still not sure how much farther we have to go from now until the listing.”
According to a stock expert who asked to remain anonymous, listing procedures are not the biggest problem as there are different options in every country.
Foreign exchange management regulations allow foreign investors to open an account in Vietnam and buy shares here, but not vice versa.
He said the system should be more equal for domestic and foreign investors.
The State Securities Commission in August began collecting its members’ opinions for a draft decree that would instruct domestic firms on how to list abroad.
Since 2007 many locally-listed firms have set overseas listing as a major goal, including Vietnam largest dairy firm Vinamilk (VNM) and PetroVietnam Drilling and Well Services Joint Stock Co. (PVD).
VietNamNet/TN
http://www.vnnnews.net/listing-abroad-not-easy-for-local-firms-insiders-say
Sunday 6 December 2009
With high grade apartments unsalable investors’ money remains buried (Vietnam)
With high grade apartments unsalable investors’ money remains buried
Last updated: Tuesday, October 6, 2009 |
VnnNews – Though prices of luxury apartments have been decreasing sharply, the demand for expensive products remains low.
Speculators complain capital has been ‘buried’ in apartments as they still have not been able to sell them for the last several months.
Phan Ha, an investor in district 1 of HCM City, said that he has two unsold high grade apartments worth nearly 6 billion dong ($20,761) at Blooming Park building. When it was launched, Ha had purchased the two apartments at 30 million dong per square metre as an investment.
However, to date, Ha still cannot sell the apartments, and the apartments’ prices have not seen any increases.
However, the address and location would appear to still be fashionable. Blooming Park is located next to Thu Thiem new urban area and the Metro Supermarket. Besides, the land area is not far from the East-West Boulevard, Thu Thiem tunnel, the belt road of Phu My Bridge and Tan Cang Industrial Zone.
Ha still cannot find buyers even when he is offering to sell the apartments at the original prices. However the prices at 2.8 billion dong ($164,700) and 3.1 billion dong ($182,352), still remain unattractive to buyers.
Other projects have also left products unsalable. Director of Tran Nao Branch of Vinaland Nguyen Xuan Loc said that high grade apartments are not proving popular these days. Few appear interested in the apartments at The Vista, Riverside or Sunrise projects.
Explaining the lack of lack of attraction, Ngo Duong Hoang Thao, Chairman of Dai Dong Duong Consultancy Company, said the supply of high grade apartments has exceeded demand.
Nguyen Thi Thanh Huong, Director of Tin Nghia real estate trading floor, said there has been little interest in high grade apartments on her trading floor, however, land plots are selling very well.
According to Thao, the main buyers of high grade apartments are secondary investors, who hope that they can sell the apartments later for profit.
However, secondary investors are quiet after suffering losses on other deals and the economic downturn has made people poorer, thus unable to afford expensive houses.
Meanwhile, low cost apartments are selling well. Le Thanh Company has sold its 134 apartments in Binh Tan district easily. The company’s Director Le Huu Nghia said that the apartments have been selling well due to their reasonable price of 6.5 million dong ($382) per square metre which is much lower than $1,300-2,000 per square metre of high grade apartments.
Phuoc Ha
http://www.vnnnews.net/with-high-grade-apartments-unsalable-investors-money-remains-buried
Last updated: Tuesday, October 6, 2009 |
VnnNews – Though prices of luxury apartments have been decreasing sharply, the demand for expensive products remains low.
Speculators complain capital has been ‘buried’ in apartments as they still have not been able to sell them for the last several months.
Phan Ha, an investor in district 1 of HCM City, said that he has two unsold high grade apartments worth nearly 6 billion dong ($20,761) at Blooming Park building. When it was launched, Ha had purchased the two apartments at 30 million dong per square metre as an investment.
However, to date, Ha still cannot sell the apartments, and the apartments’ prices have not seen any increases.
However, the address and location would appear to still be fashionable. Blooming Park is located next to Thu Thiem new urban area and the Metro Supermarket. Besides, the land area is not far from the East-West Boulevard, Thu Thiem tunnel, the belt road of Phu My Bridge and Tan Cang Industrial Zone.
Ha still cannot find buyers even when he is offering to sell the apartments at the original prices. However the prices at 2.8 billion dong ($164,700) and 3.1 billion dong ($182,352), still remain unattractive to buyers.
Other projects have also left products unsalable. Director of Tran Nao Branch of Vinaland Nguyen Xuan Loc said that high grade apartments are not proving popular these days. Few appear interested in the apartments at The Vista, Riverside or Sunrise projects.
Explaining the lack of lack of attraction, Ngo Duong Hoang Thao, Chairman of Dai Dong Duong Consultancy Company, said the supply of high grade apartments has exceeded demand.
Nguyen Thi Thanh Huong, Director of Tin Nghia real estate trading floor, said there has been little interest in high grade apartments on her trading floor, however, land plots are selling very well.
According to Thao, the main buyers of high grade apartments are secondary investors, who hope that they can sell the apartments later for profit.
However, secondary investors are quiet after suffering losses on other deals and the economic downturn has made people poorer, thus unable to afford expensive houses.
Meanwhile, low cost apartments are selling well. Le Thanh Company has sold its 134 apartments in Binh Tan district easily. The company’s Director Le Huu Nghia said that the apartments have been selling well due to their reasonable price of 6.5 million dong ($382) per square metre which is much lower than $1,300-2,000 per square metre of high grade apartments.
Phuoc Ha
http://www.vnnnews.net/with-high-grade-apartments-unsalable-investors-money-remains-buried
Scarce dollar strains Vietnam currency market
Scarce dollar strains Vietnam currency market
Last updated: Sunday, October 4, 2009 |
VnnNews - Vietnam is facing a dollar shortage as a result of lackluster capital inflows this year, experts say.
VnnNews - Vietnam is facing a dollar shortage as a result of lackluster capital inflows this year, experts say, calling for adjustments to the exchange rate to ease the strain on the local currency market.
The foreign currency supply this year, for the first time, has fallen short of demand and the central bank had to sell part of its dollar reserves to ease the shortage, Le Duc Thuy, a former central bank governor, said in an interview published by the weekly Saigon Economic Times in mid September.
Although imports fell, the decline in exports and capital inflows was even greater, said Thuy, who is now chairman of the National Finance Supervision Committee.
A senior official at ANZ Vietnam, who is not authorized to speak on record, told Thanh Nien Weekly that foreign investments and overseas remittances have helped keep Vietnam’s balance of payment in check. But this year “we see a reduction in all of those sources due to the global crisis and the collapse of the stock market,” he said.
“From a microeconomic standpoint, businesses – especially exporters – are reluctant to sell dollars to banks in hope that their dollars will be worth more,” the ANZ official said.
“These factors combined lead to the scarcity of dollars for payment in the market… The increase of the dong/dollar rate reflects this scarcity.”
The dong has weakened about 2 percent this year against the dollar and touched a record low of VND17,862 on July 23, according to Bloomberg data.
“The currency market is now under strain,” Thuy said. “Businesses have difficulties in currency trading. Those who have foreign money don’t want to sell it while those in need of foreign exchange can’t buy it.”
Many businesses that needed dollars chose to take dong loans to benefit from a government rate subsidy package. They then bought dollars, Thuy said.
If businesses had just borrowed in dollars, they would not have put any pressure on the currency market, he said.
An increase in dollar borrowings could partially lessen the pressure on the exchange rate because businesses would have more dollars to settle payments, the official at ANZ said.
“It is important to note that while dollars for payment are quite scarce, dollars for lending, on the other hand, are rather sufficient. This is because banks are only allowed to lend the dollars from their customers’ [deposit] accounts, but not sell them.”
Exchange rate
Nguyen Khac Quoc Bao, a professor at the Ho Chi Minh City University of Economics, said in a telephone interview on Tuesday that the current pressure on the dong/dollar rate can be explained mainly by psychological factors.
Many people fear inflation will not ease and the dollar will gain value against the dong, and this prompts them to move their assets out of the dong and place it on the dollar, he said.
However, Bao said he expects the pressure on the currency market may ease soon as the central bank is likely to step in and adjust the exchange rate slightly.
The first good sign on the market may have emerged already. The central bank said in a weekly report on its website last Friday that local exporters have started increasing sales of dollars to commercial banks, helping ease the dollar shortage.
A banker told Reuters Monday that the central bank’s pledge to keep the dong stable has calmed businesses, especially exporters, and encouraged them to sell their dollar earnings.
The central bank had sufficient dollar reserves to intervene in the market when necessary, but the question is whether the bank needed to do so or not, Thuy said in the interview with the Saigon Economic Times.
“I think an adjustment in the official exchange rate is enough to keep supply and demand in balance, without the need for government intervention.” (Vietnam recently devalued its Dong)
An experience gained from the past is that dollar prices in the unofficial market should be kept within VND100 above the rates in banks, Thuy noted. “There will be problems if the gap is more than VND100.”
With a gap of VND500, for instance, a firm selling $1 million to a bank would earn VND500 million ($28,026) less than what they could from the unofficial market, he said, pointing out that this difference is enough for a medium-sized firm to pay salaries for several months.
VietNamNet/Thanh Nien
http://www.vnnnews.net/scarce-dollar-strains-vietnam-currency-market
VnnNews - Vietnam is facing a dollar shortage as a result of lackluster capital inflows this year, experts say.
The foreign currency supply this year, for the first time, has fallen short of demand and the central bank had to sell part of its dollar reserves to ease the shortage, Le Duc Thuy, a former central bank governor, said in an interview published by the weekly Saigon Economic Times in mid September.
- Foreign direct investment inflows into Vietnam dropped 11 percent to US$7.2 billion in the first nine months of this year from a year ago.
- Meanwhile, overseas remittances are forecast to fall to $6.8 billion this year, compared to $8 billion in 2008.
http://www.vnnnews.net/scarce-dollar-strains-vietnam-currency-market
Finance Ministry researcher warns that exports don’t always pay (Vietnam)
Finance Ministry researcher warns that exports don’t always pay
Last updated: Thursday, October 1, 2009 |
VnnNews – When Vietnam increases its exports, it must import more materials to make exports, an expert warns.
In the first nine months of 2009, garment exports brought Vietnam $6.7 billion in revenue, according to the General Statistics Office (GSO). Meanwhile, Vietnam had to import $4 billion worth of materials to create those exports.
Dr. Vu Dinh Anh, a deputy director of the Market and Price Research Institute, a Finance Ministry think tank, said that in the garment industry, the cost of materials is 80 percent of the total production cost. Therefore, Anh said, the more Vietnam exports garments, the more it has to pay to import materials.
Anh also reached a surprising conclusion: although exports create several tens of millions of jobs and bring some $60 billion every year to the national economy, if the cost of imports needed to enable the production of export products is considered, exports actually reduce GDP by two percent.
Among the import items, machinery and material inputs for domestic production account for the biggest proportions. Only ten percent of Vietnam’s imports are consumer goods. Therefore, experts say that even if Vietnam raises the tariff on cars and imposes a luxury tax on mobile phones, this still won’t close the trade gap.
Meanwhile, there are a lot of problems relating to exports. Though export volume has increased sharply (up 11 percent year over year), export revenues did not increase proportionately – in fact they fell by 10 percent!
Although crude oil exports increased eight percent year over year in the first eight months of 2009, revenues from oil exports fell by 41 percent. As for rice and pepper exports, though the export volume was up by 50 percent, total earnings fell by slightly.
Dr Nguyen Thi Nhieu of the Trade Research Institute warns that no breakthrough is likely from now to the end of the year. She said that the demand in the world market has just begun recovering from a low base and a lot of economies have applied measures to protect their local production. The competition among exporters has become stiffer in the world market, and Vietnam’s competitiveness remains weak.
Dr. Anh of the Market and Price Institute believes that it is not imperative to push up exports to fix the current problems in the trade balance and to avoid bad balance of payments impacts. Instead Vietnam should restructure the import-export menu and develop its internal market.
The General Statistics Office (GSO) has urged encouraging domestic consumption and relying on the internal market as the ‘fulcrum’ for development. GSO argues that Vietnam should make strategic choices among the materials it seeks to export and to supply to the domestic market.
Even during the Asian financial crisis of 1997-99, Vietnam was able to maintain positive export growth. However, this year the Ministry of Industry and Trade projects that Vietnam will export only $59 billion worth of products, a six percent decrease from 2008 and considerably short of the target. If this scenario holds, 2009 will be the first year in two decades of doi moi policy that export values will decrease.
VietNamNet/VNE
http://www.vnnnews.net/finance-ministry-researcher-warns-that-exports-dont-always-pay
Last updated: Thursday, October 1, 2009 |
VnnNews – When Vietnam increases its exports, it must import more materials to make exports, an expert warns.
In the first nine months of 2009, garment exports brought Vietnam $6.7 billion in revenue, according to the General Statistics Office (GSO). Meanwhile, Vietnam had to import $4 billion worth of materials to create those exports.
Dr. Vu Dinh Anh, a deputy director of the Market and Price Research Institute, a Finance Ministry think tank, said that in the garment industry, the cost of materials is 80 percent of the total production cost. Therefore, Anh said, the more Vietnam exports garments, the more it has to pay to import materials.
Anh also reached a surprising conclusion: although exports create several tens of millions of jobs and bring some $60 billion every year to the national economy, if the cost of imports needed to enable the production of export products is considered, exports actually reduce GDP by two percent.
Among the import items, machinery and material inputs for domestic production account for the biggest proportions. Only ten percent of Vietnam’s imports are consumer goods. Therefore, experts say that even if Vietnam raises the tariff on cars and imposes a luxury tax on mobile phones, this still won’t close the trade gap.
Meanwhile, there are a lot of problems relating to exports. Though export volume has increased sharply (up 11 percent year over year), export revenues did not increase proportionately – in fact they fell by 10 percent!
Although crude oil exports increased eight percent year over year in the first eight months of 2009, revenues from oil exports fell by 41 percent. As for rice and pepper exports, though the export volume was up by 50 percent, total earnings fell by slightly.
Dr Nguyen Thi Nhieu of the Trade Research Institute warns that no breakthrough is likely from now to the end of the year. She said that the demand in the world market has just begun recovering from a low base and a lot of economies have applied measures to protect their local production. The competition among exporters has become stiffer in the world market, and Vietnam’s competitiveness remains weak.
Dr. Anh of the Market and Price Institute believes that it is not imperative to push up exports to fix the current problems in the trade balance and to avoid bad balance of payments impacts. Instead Vietnam should restructure the import-export menu and develop its internal market.
The General Statistics Office (GSO) has urged encouraging domestic consumption and relying on the internal market as the ‘fulcrum’ for development. GSO argues that Vietnam should make strategic choices among the materials it seeks to export and to supply to the domestic market.
Even during the Asian financial crisis of 1997-99, Vietnam was able to maintain positive export growth. However, this year the Ministry of Industry and Trade projects that Vietnam will export only $59 billion worth of products, a six percent decrease from 2008 and considerably short of the target. If this scenario holds, 2009 will be the first year in two decades of doi moi policy that export values will decrease.
VietNamNet/VNE
http://www.vnnnews.net/finance-ministry-researcher-warns-that-exports-dont-always-pay
Vietnam stock market less attractive than neighbours’
Vietnam stock market less attractive than neighbours’
Last updated: Tuesday, November 17, 2009 |
VnnNews – HSBC still says Vietnam’s stock market is less attractive than other regional markets.
HSBC highlighted that after reaching a peak of 600 points in late October 2009, the VN Index had decreased by eight percent by November 9.
The VN Index has lost more points than other Asian markets from the beginning of the fourth quarter of the year to November 9. According to HSBC, since then Vietnam has remained the second worst market in Asia in the fourth quarter.
October 2009 witnessed the prosperity of Vietnam’s stock market with the daily trading volume of both the Hanoi and HCM City increasing by 63 percent to 315 million dollar from 193 million dollar in August.
However, HSBC pointed out that within the first five days of November, foreign investors had a net sale of 15 million dollar, a level which much higher than the one million dollar level seen in October.
The sale of foreign investors has led to the decrease in foreign ownership ratio in Vietnam’s stocks to 16 percent from 21 percent in July.
According to HSBC, foreign investors are now making up five percent of daily total trading volume on the market. After the VN Index has been decreasing, losing achievements gained in the fourth quarter, the market now has Asia Commercial Bank’s share (ACB) as the only share item which has the foreign ownership ratio at the ceiling level.
The report made conclusion that in the current context of Vietnam’s weak macroeconomic conditions, foreign investors will not return to the market soon.
The report affirmed that Vietnam’s stocks are now more expensive than stocks in other regional markets. The same conclusion has been repeated continuously in recent reports about Vietnam’s market.
According to HSBC, the current P/E (price to earning ratio) on HCM City bourse is 23.8. If suggesting that the EPS (earnings per share) of the next 12 months is 20 percent, then the P/E of the next 12 months would be 19.1, while the P/E of 2010 would be 15.
HSBC believes that these P/Es are well higher than other regional markets, such as Thailand (P/E of the next 12 months would be 12), China (14.7), Indonesia (14.6) and the Philippines (15).
The banking group said that it recognizes less factors which may foster growth in Vietnam than in other markets. The experts of the banking group have doubts about the recovery of the real estate market in Vietnam.
VietNamNet/TBKTVN
http://www.vnnnews.net/vietnam-stock-market-less-attractive-than-neighbours
Last updated: Tuesday, November 17, 2009 |
VnnNews – HSBC still says Vietnam’s stock market is less attractive than other regional markets.
HSBC highlighted that after reaching a peak of 600 points in late October 2009, the VN Index had decreased by eight percent by November 9.
The VN Index has lost more points than other Asian markets from the beginning of the fourth quarter of the year to November 9. According to HSBC, since then Vietnam has remained the second worst market in Asia in the fourth quarter.
October 2009 witnessed the prosperity of Vietnam’s stock market with the daily trading volume of both the Hanoi and HCM City increasing by 63 percent to 315 million dollar from 193 million dollar in August.
However, HSBC pointed out that within the first five days of November, foreign investors had a net sale of 15 million dollar, a level which much higher than the one million dollar level seen in October.
The sale of foreign investors has led to the decrease in foreign ownership ratio in Vietnam’s stocks to 16 percent from 21 percent in July.
According to HSBC, foreign investors are now making up five percent of daily total trading volume on the market. After the VN Index has been decreasing, losing achievements gained in the fourth quarter, the market now has Asia Commercial Bank’s share (ACB) as the only share item which has the foreign ownership ratio at the ceiling level.
The report made conclusion that in the current context of Vietnam’s weak macroeconomic conditions, foreign investors will not return to the market soon.
The report affirmed that Vietnam’s stocks are now more expensive than stocks in other regional markets. The same conclusion has been repeated continuously in recent reports about Vietnam’s market.
According to HSBC, the current P/E (price to earning ratio) on HCM City bourse is 23.8. If suggesting that the EPS (earnings per share) of the next 12 months is 20 percent, then the P/E of the next 12 months would be 19.1, while the P/E of 2010 would be 15.
HSBC believes that these P/Es are well higher than other regional markets, such as Thailand (P/E of the next 12 months would be 12), China (14.7), Indonesia (14.6) and the Philippines (15).
The banking group said that it recognizes less factors which may foster growth in Vietnam than in other markets. The experts of the banking group have doubts about the recovery of the real estate market in Vietnam.
VietNamNet/TBKTVN
http://www.vnnnews.net/vietnam-stock-market-less-attractive-than-neighbours
Hanoi’s real estate prices rise by 20%
Ha Noi’s real estate prices rise by 20%
Last updated: Sunday, November 15, 2009 |
VnnNews - Real estate in several areas of the capital city has seen 20-30 per cent increases in the last month.
Those affected include newly incorporated areas in expanded Ha Noi such as Ha Dong, Tu Liem and Thanh Tri.
Price of real estate in the areas was equal to or even higher than that in the inner city’s districts, said Dao Minh Thuy from the Ha Dong’s Long Thuy Property Brokerage Company.
Thuy said that a square metre of land along major streets in Ha Dong currently reached VND140-150 million (US$7,800-8,300) and roughly VND180 million ($10,000) in Tu Liem’s Le Duc Tho Street. A square metre of land in Bach Mai Street is currently about VND130-135 million.
Land located off small alleys had also sharply increased by roughly VND5 million per square metre over last month, said a property broker in the My Dinh area said.
A property investor, who bought a plot in Me Linh District at the price of VND9.2 million per square metre at a property trading floor two weeks ago, said that the floor currently appraised the land at the price of VND11 million per square metre.
Earlier this month, thousands of people crowded the sales office of the Nam Cuong Real Estate Co, expecting to be able to buy apartments at their original prices.
A deputy director of a construction company, who declined to be named, attributed the price rises in the past month to speculation.
Currently, people can only purchase apartments directly from investors if they have close relations.
The scramble for purchases is based on speculators expecting prices of the apartments to increase dramatically when they are later sold on the secondary market. The prices set for the Duong Noi flats, which will range in size from 50-200sq.m, are described as very ‘soft’, from $880 to $1,200 per square metre.
The deputy Minister of Construction, Nguyen Tran Nam, said that people often bought property based on rumours, warning investors to be careful with such information.
Nam said that some investors were overly influenced by rumours leading them to quickly invest but after little research. Whenever they heard that land prices in certain areas were “hot” they would immediately rush to buy.
Le Duc Hien, deputy head of sales at Viglacera Real Estate, said that the real estate market needed transparency.
Hien said that with transparency, clients would be able to purchase apartments at their original prices, while investors would gain prestige in the eyes of people. Real estate developers who could gain customers’ confidence would be the long-term winners in the market.
VietNamNet/VNS
http://www.vnnnews.net/ha-nois-real-estate-prices-rise-by-20
Last updated: Sunday, November 15, 2009 |
VnnNews - Real estate in several areas of the capital city has seen 20-30 per cent increases in the last month.
Those affected include newly incorporated areas in expanded Ha Noi such as Ha Dong, Tu Liem and Thanh Tri.
Price of real estate in the areas was equal to or even higher than that in the inner city’s districts, said Dao Minh Thuy from the Ha Dong’s Long Thuy Property Brokerage Company.
Thuy said that a square metre of land along major streets in Ha Dong currently reached VND140-150 million (US$7,800-8,300) and roughly VND180 million ($10,000) in Tu Liem’s Le Duc Tho Street. A square metre of land in Bach Mai Street is currently about VND130-135 million.
Land located off small alleys had also sharply increased by roughly VND5 million per square metre over last month, said a property broker in the My Dinh area said.
A property investor, who bought a plot in Me Linh District at the price of VND9.2 million per square metre at a property trading floor two weeks ago, said that the floor currently appraised the land at the price of VND11 million per square metre.
Earlier this month, thousands of people crowded the sales office of the Nam Cuong Real Estate Co, expecting to be able to buy apartments at their original prices.
A deputy director of a construction company, who declined to be named, attributed the price rises in the past month to speculation.
Currently, people can only purchase apartments directly from investors if they have close relations.
The scramble for purchases is based on speculators expecting prices of the apartments to increase dramatically when they are later sold on the secondary market. The prices set for the Duong Noi flats, which will range in size from 50-200sq.m, are described as very ‘soft’, from $880 to $1,200 per square metre.
The deputy Minister of Construction, Nguyen Tran Nam, said that people often bought property based on rumours, warning investors to be careful with such information.
Nam said that some investors were overly influenced by rumours leading them to quickly invest but after little research. Whenever they heard that land prices in certain areas were “hot” they would immediately rush to buy.
Le Duc Hien, deputy head of sales at Viglacera Real Estate, said that the real estate market needed transparency.
Hien said that with transparency, clients would be able to purchase apartments at their original prices, while investors would gain prestige in the eyes of people. Real estate developers who could gain customers’ confidence would be the long-term winners in the market.
VietNamNet/VNS
http://www.vnnnews.net/ha-nois-real-estate-prices-rise-by-20
Smart money ready for future profits (Vietnam)
Smart money ready for future profits
Last updated: Saturday, October 31, 2009 |
VinaCapital is holding its 2009 Investor Conference just as the Vietnamese economy is starting to heat up again. However, foreign investors have not yet returned to Vietnam after the 2008 crisis.
VinaCapital is holding its 2009 Investor Conference just as the Vietnamese economy is starting to heat up again. However, foreign investors have not yet returned to Vietnam after the 2008 crisis.
VinaCapital Group’s chairman Horst F. Geicke discusses with VIR the opportunities foreign investors should be looking for in 2010 and beyond.
Foreign direct investment registration and foreign portfolio inflows have dropped considerably in 2009. Can Vietnam regain the investment momentum lost after 2008?
Vietnam’s economic performance in second and third quarters of 2009 has been remarkable, including the recovery of the capital markets. But it’s true that foreign investors have been largely absent from the market, buying only about $36 million in shares. This is not the case for countries like Indonesia and Thailand, so we could say that Vietnam has temporarily lost its shimmer in the eyes of foreign investors. However, I believe this downturn will not last.
After the domestic crisis in early 2008 sunk the VNIndex to under 400 points, the market briefly recovered to 600 points in mid-2008 before the global crisis took hold and the index fell to a low of 235 in February 2009. With the country’s recent economic rebound, the market is once again at 600 points.
This type of turbulence always challenges foreign investors and has people rethinking their strategies. For VinaCapital, our view on the market here has not changed even during the recent turbulent times.
How should Vietnam approach foreign investors now? Is enough being done to attract investors that seem to have begun looking elsewhere?
One very positive sign is that during this volatile period, Vietnam’s government has managed economic policy with a notable degree of flexibility and competence. It is not often that a country can emerge from two full-blown economic crises in the space of 12 months to record 5 per cent gross domestic product growth and world-beating stock market gains. Vietnam’s economic resilience in 2009 has been nothing short of remarkable.
This will boost the confidence of foreign investors. That Vietnam experienced great volatility during the 2008 financial crisis was essentially unavoidable. How the government managed to stabilise the economy is what will garner attention, and this is something that should be explained and promoted to foreign investors as much as possible.
Among the positive press so far: HSBC in September predicted gross domestic product (GDP) growth in 2010 would be 6.8 per cent, and UK Trade & Investment for the second year running has Vietnam at the top of its non-BRIC ‘priority markets’ for global investors over the next five years. So people are taking notice.
VinaCapital will continue to work hard at promoting Vietnam. We have played an active role for six years in communicating the ‘Vietnam story’ to investors around the world. At venues like the World Economic Forum, Vietnam’s presence has been strengthened in part by VinaCapital’s efforts as a ‘commercial ambassador,’ bringing foreign investors and the country’s top corporate leaders together.
What are some of the main messages VinaCapital is delivering at its investor conference? What can you share about Vietnam’s current investment environment?
Above all, we believe that Vietnam is one of the top emerging markets in the world today. However, even as the dark clouds clear from the economy, events of the past two years have taught us all valuable lessons in preparing for the next rainy day.
Vietnam has great prospects, but at the corporate level there will be winners and losers. Proper asset allocation and risk management will be crucial to avoid unnecessary losses if the market experiences another unexpected downturn. We should manage our expectations and not encourage a return to the over-exuberance of 2006-07.
Identifying the winning sectors is not so difficult. But finding the winning companies and opportunities within these sectors is more challenging. The driving force in the domestic economy is urbanisation and the growing middle-class consumer base with its increasing demand for improved services and more modern living and shopping spaces.
Residential housing and retail facilities, urban infrastructure, consumer goods, healthcare and financial services are all areas that will develop rapidly. These sectors are relatively easy to identify, as they are common to many emerging markets.
VietNamNet/VIR
http://www.vnnnews.net/smart-money-ready-for-future-profits
Last updated: Saturday, October 31, 2009 |
VinaCapital is holding its 2009 Investor Conference just as the Vietnamese economy is starting to heat up again. However, foreign investors have not yet returned to Vietnam after the 2008 crisis.
VinaCapital is holding its 2009 Investor Conference just as the Vietnamese economy is starting to heat up again. However, foreign investors have not yet returned to Vietnam after the 2008 crisis.
VinaCapital Group’s chairman Horst F. Geicke discusses with VIR the opportunities foreign investors should be looking for in 2010 and beyond.
Foreign direct investment registration and foreign portfolio inflows have dropped considerably in 2009. Can Vietnam regain the investment momentum lost after 2008?
Vietnam’s economic performance in second and third quarters of 2009 has been remarkable, including the recovery of the capital markets. But it’s true that foreign investors have been largely absent from the market, buying only about $36 million in shares. This is not the case for countries like Indonesia and Thailand, so we could say that Vietnam has temporarily lost its shimmer in the eyes of foreign investors. However, I believe this downturn will not last.
After the domestic crisis in early 2008 sunk the VNIndex to under 400 points, the market briefly recovered to 600 points in mid-2008 before the global crisis took hold and the index fell to a low of 235 in February 2009. With the country’s recent economic rebound, the market is once again at 600 points.
This type of turbulence always challenges foreign investors and has people rethinking their strategies. For VinaCapital, our view on the market here has not changed even during the recent turbulent times.
How should Vietnam approach foreign investors now? Is enough being done to attract investors that seem to have begun looking elsewhere?
One very positive sign is that during this volatile period, Vietnam’s government has managed economic policy with a notable degree of flexibility and competence. It is not often that a country can emerge from two full-blown economic crises in the space of 12 months to record 5 per cent gross domestic product growth and world-beating stock market gains. Vietnam’s economic resilience in 2009 has been nothing short of remarkable.
This will boost the confidence of foreign investors. That Vietnam experienced great volatility during the 2008 financial crisis was essentially unavoidable. How the government managed to stabilise the economy is what will garner attention, and this is something that should be explained and promoted to foreign investors as much as possible.
Among the positive press so far: HSBC in September predicted gross domestic product (GDP) growth in 2010 would be 6.8 per cent, and UK Trade & Investment for the second year running has Vietnam at the top of its non-BRIC ‘priority markets’ for global investors over the next five years. So people are taking notice.
VinaCapital will continue to work hard at promoting Vietnam. We have played an active role for six years in communicating the ‘Vietnam story’ to investors around the world. At venues like the World Economic Forum, Vietnam’s presence has been strengthened in part by VinaCapital’s efforts as a ‘commercial ambassador,’ bringing foreign investors and the country’s top corporate leaders together.
What are some of the main messages VinaCapital is delivering at its investor conference? What can you share about Vietnam’s current investment environment?
Above all, we believe that Vietnam is one of the top emerging markets in the world today. However, even as the dark clouds clear from the economy, events of the past two years have taught us all valuable lessons in preparing for the next rainy day.
Vietnam has great prospects, but at the corporate level there will be winners and losers. Proper asset allocation and risk management will be crucial to avoid unnecessary losses if the market experiences another unexpected downturn. We should manage our expectations and not encourage a return to the over-exuberance of 2006-07.
Identifying the winning sectors is not so difficult. But finding the winning companies and opportunities within these sectors is more challenging. The driving force in the domestic economy is urbanisation and the growing middle-class consumer base with its increasing demand for improved services and more modern living and shopping spaces.
Residential housing and retail facilities, urban infrastructure, consumer goods, healthcare and financial services are all areas that will develop rapidly. These sectors are relatively easy to identify, as they are common to many emerging markets.
VietNamNet/VIR
http://www.vnnnews.net/smart-money-ready-for-future-profits
Major private gold shop shut down, owner reportedly flees (Vietnam)
Major private gold shop shut down, owner reportedly flees
Last updated: Wednesday, November 18, 2009 |
Tuan Tai gold shop, one of HCMC’s biggest private bullion traders, on Monday suspended its operations as police raided the store in the center in District 5.
The electronic board of Tuan Tai gold shop still displays gold prices on November 16, but its operations stop as the shop owner is suspected of having run away with debt.
People who were sitting in front of the shop at 37-39 Chau Van Liem Street on Monday said the shop owner, whom gold traders often refer to as Ms Kim Thanh, had run away due to big debt.
As witnessed by the Daily on Monday afternoon, jewelry and other gold products were no longer displayed at the shop.
Some anxious lenders of the shop owner who were either inside or outside the shop said the shop owner had raised funds from them at much higher interest rates than what banks were offering. They said the shop owner had disappeared since November 15.
The general director of a gold trading company said Tuan Tai was a fairly big gold trader in the city, so the closing of the shop would affect those people having a trade relationship with it.
Trading accounts held by Tuan Tai at some gold exchanges have been frozen due to great losses. On Tuan Tai’s website, it said it was a trading member of the gold exchanges of banks like Asia Commercial Bank (ACB), Vietnam Asia Commercial Bank, Eximbank, and Sacombank.
Police of District 5 and those of the district’s Ward 14 where the gold shop is registered declined to comment when reached by the Daily on Monday afternoon. Witnesses around the shop said police had come in the morning and took away things from the shop.
Tuan Tai Service Trading Production Limited Company gained a business license from the HCMC Department of Planning and Investment on October 18, 2005 with chartered capital of VND100 billion. Its operations include trading and importing gold and jewelry, and trading gold on foreign exchanges.
Tuan Tai is one of the few gold trading companies licensed by the central bank to trade gold on foreign exchanges. The company also provides big volumes of SJC gold bars to customers including commercial banks and local gold trading companies.
VietNamNet/SGT
http://www.vnnnews.net/major-private-gold-shop-shut-down-owner-reportedly-flees
Last updated: Wednesday, November 18, 2009 |
Tuan Tai gold shop, one of HCMC’s biggest private bullion traders, on Monday suspended its operations as police raided the store in the center in District 5.
The electronic board of Tuan Tai gold shop still displays gold prices on November 16, but its operations stop as the shop owner is suspected of having run away with debt.
People who were sitting in front of the shop at 37-39 Chau Van Liem Street on Monday said the shop owner, whom gold traders often refer to as Ms Kim Thanh, had run away due to big debt.
As witnessed by the Daily on Monday afternoon, jewelry and other gold products were no longer displayed at the shop.
Some anxious lenders of the shop owner who were either inside or outside the shop said the shop owner had raised funds from them at much higher interest rates than what banks were offering. They said the shop owner had disappeared since November 15.
The general director of a gold trading company said Tuan Tai was a fairly big gold trader in the city, so the closing of the shop would affect those people having a trade relationship with it.
Trading accounts held by Tuan Tai at some gold exchanges have been frozen due to great losses. On Tuan Tai’s website, it said it was a trading member of the gold exchanges of banks like Asia Commercial Bank (ACB), Vietnam Asia Commercial Bank, Eximbank, and Sacombank.
Police of District 5 and those of the district’s Ward 14 where the gold shop is registered declined to comment when reached by the Daily on Monday afternoon. Witnesses around the shop said police had come in the morning and took away things from the shop.
Tuan Tai Service Trading Production Limited Company gained a business license from the HCMC Department of Planning and Investment on October 18, 2005 with chartered capital of VND100 billion. Its operations include trading and importing gold and jewelry, and trading gold on foreign exchanges.
Tuan Tai is one of the few gold trading companies licensed by the central bank to trade gold on foreign exchanges. The company also provides big volumes of SJC gold bars to customers including commercial banks and local gold trading companies.
VietNamNet/SGT
http://www.vnnnews.net/major-private-gold-shop-shut-down-owner-reportedly-flees
Investors call for greater stock market clarity (Vietnam)
Investors call for greater stock market clarity
Last updated: Saturday, December 5, 2009 |
Foreign investors have suggested more openness from the government and improved transparency from listed firms as measures to lubricate trading on the stock market.
The Capital Markets Working Group (CMWG) said at a recent conference in Hanoi that the government should allow the establishment of different kinds of equity funds, including retirement equity funds, to attract professional investors and to raise market liquidity.
Vietnam should have more portfolio investors for long-term investments, the group said in its report. “Around 60 percent portfolio investors and 40 percent individual investors would suit the Vietnamese market,” it said
Portfolio investors now account for just 10 percent of the market.
They said the government should allow investors that hold more than five percent of shares of a certain stock to conduct trading beyond the daily limit, and to issue special stock exchange boards for foreign investors, which have been used by many countries across the world.
Overseas investors bought a net VND72.3 billion (US$3.9 million) of stocks on the Ho Chi Minh Stock Exchange Thursday as the benchmark VN-Index lost 0.87 percent to close at 494.8, the exchange said on its website.
It said foreign investors have purchased a net VND1.79 trillion worth of shares on the country’s main exchange so far this year, compared with VND5.8 trillion for all of 2008.
On Tuesday, they also bought a net VND34.9 billion ($1.9 million) of stocks on the exchange.
Other changes suggested by the CMWG to concerned government agencies – the Ministry of Finance and the State Securities
Commission – include legalizing margin trading and letting one investor own many accounts at different brokerages.
The group, whose members include the Vietnam Association for Financial Investors, the Vietnam Association of Securities Business, fund management firms such as Dragon Capital, Indochina Capital, and Vietnam’s largest brokerage Saigon Securities Inc., also blamed listed firms for releasing their business results later than scheduled.
Vietnam’s stock market, considered to be in its nascent stages by analysts, has fluctuated many times as investors react warily to a lack of news.
They recommended the government temporarily remove a listed firm from the exchange if it delays announcing its business results more than three times.
Chairman of the group, Dominic Scriven, also managing director of Dragon Capital Group – the largest and most experienced foreign portfolio investor in Vietnam, called for equal taxes for portfolio and individual investors as well as between local and foreign investors.
Tran Xuan Ha, deputy minister of Finance, said the current taxation already guarantees equality between investors. “The problem may just be about complicated procedures. That will be fixed.”
VietNamNet/Thanh Nien
http://www.vnnnews.net/investors-call-for-greater-stock-market-clarity
Last updated: Saturday, December 5, 2009 |
Foreign investors have suggested more openness from the government and improved transparency from listed firms as measures to lubricate trading on the stock market.
The Capital Markets Working Group (CMWG) said at a recent conference in Hanoi that the government should allow the establishment of different kinds of equity funds, including retirement equity funds, to attract professional investors and to raise market liquidity.
Vietnam should have more portfolio investors for long-term investments, the group said in its report. “Around 60 percent portfolio investors and 40 percent individual investors would suit the Vietnamese market,” it said
Portfolio investors now account for just 10 percent of the market.
They said the government should allow investors that hold more than five percent of shares of a certain stock to conduct trading beyond the daily limit, and to issue special stock exchange boards for foreign investors, which have been used by many countries across the world.
Overseas investors bought a net VND72.3 billion (US$3.9 million) of stocks on the Ho Chi Minh Stock Exchange Thursday as the benchmark VN-Index lost 0.87 percent to close at 494.8, the exchange said on its website.
It said foreign investors have purchased a net VND1.79 trillion worth of shares on the country’s main exchange so far this year, compared with VND5.8 trillion for all of 2008.
On Tuesday, they also bought a net VND34.9 billion ($1.9 million) of stocks on the exchange.
Other changes suggested by the CMWG to concerned government agencies – the Ministry of Finance and the State Securities
Commission – include legalizing margin trading and letting one investor own many accounts at different brokerages.
The group, whose members include the Vietnam Association for Financial Investors, the Vietnam Association of Securities Business, fund management firms such as Dragon Capital, Indochina Capital, and Vietnam’s largest brokerage Saigon Securities Inc., also blamed listed firms for releasing their business results later than scheduled.
Vietnam’s stock market, considered to be in its nascent stages by analysts, has fluctuated many times as investors react warily to a lack of news.
They recommended the government temporarily remove a listed firm from the exchange if it delays announcing its business results more than three times.
Chairman of the group, Dominic Scriven, also managing director of Dragon Capital Group – the largest and most experienced foreign portfolio investor in Vietnam, called for equal taxes for portfolio and individual investors as well as between local and foreign investors.
Tran Xuan Ha, deputy minister of Finance, said the current taxation already guarantees equality between investors. “The problem may just be about complicated procedures. That will be fixed.”
VietNamNet/Thanh Nien
http://www.vnnnews.net/investors-call-for-greater-stock-market-clarity
Stocks, gold, real estate or dollars – what’s best for Vietnam’s investors?
Stocks, gold, real estate or dollars – what’s best for Vietnam’s investors?
Last updated: Monday, November 30, 2009 |
Lao Dong was at a conference where various experts argued about where Vietnam’s groggy investors ought to put their money, if they still have any.
Stocks, gold, real estate or dollars – what’s best for Vietnam’s investors?
All investments are risky
The gyrations of the world gold market recently have helped many Vietnamese earn a fortune, but at least as many others have been cleaned out. Amateur investors are conspicuous in the latter group, having plunged in without good market information and all too often placing their bets with the help of dreams and horoscopes.
Nguyen Minh Tri, Director of Agribank’s Gold, Silver and Gemstone Company said that investors on the gold trading floors rarely ‘win.’ That’s because the gold price is influenced by many unpredictable factors, such as the crude oil price, the currency exchange rate and international politics.
According to Tri, a person with ten dong to invest should allocate two to gold. They should sell gold right away when they can make a profit instead of greedily waiting for a bigger profit.
The Deputy General Director of Asia Commercial Bank, Do Minh Toan, disagrees. Though it’s a high risk form of investment, he said, gold investors still have a lot of opportunities to earn fat profits.
Two experts consulted on stocks, Huynh Minh of Ban Viet Securities and Nguyen Ngoc Truong Chinh of Sen Vang Securities, said that if investors follow a long term investment plan instead of ‘surfing’ in and out of the market, they will always have opportunities.
We Vietnamese have always felt that tangible things like gold or real estate are ‘safer,’ Chinh noted. We think that we will still have ‘assets’ even when real estate or gold prices decrease, whereas we will lose everything if we invest in stocks and the companies go bankrupt.
Real estate market judged the least bad choice at present
Some speakers pointed out that investment preferences in Vietnam have been greatly influenced by changing Government policies, a sign of the market’s immaturity. Most investors just follow the crowd.
In 2006-2007, investors poured money into stocks. When the stock market cooled off, they rushed to ‘throw’ money into the real estate market. Then when there was a chill in real estate, many shifted to make speculative investments in gold. Such inconsistency rarely pays off.
Participants from the real estate sector called it the safest investment channel for investors who can’t afford to lose their money.
Thu Duc Housing Development Co. Chairman Le Chi Hieu declared “tourism real estate” the wave of the future. A top executive of Nova Real Estate Co. pointed out that in real estate, investors always have two options – they can either invest directly or through financial intermediaries.
Dr. Do Thi Loan, Secretary General of the HCM City Real Estate Association, advises people to choose real estate because of its reasonable profit and high safety.
However, Luong Tri Thin, Chairman of Dat Xanh, a construction and real estate company, pointed out that real estate investors remain vulnerable to legal uncertainties, “because the Government changes policies regularly.” Further, Thin argued, there’s a financial mismatch — real estate developers gnerally need to finance projects on a twenty to thirty year horizon but can only borrow money for a maximum term of 15 years.
VietNamNet/LD
Last updated: Monday, November 30, 2009 |
Lao Dong was at a conference where various experts argued about where Vietnam’s groggy investors ought to put their money, if they still have any.
Stocks, gold, real estate or dollars – what’s best for Vietnam’s investors?
All investments are risky
The gyrations of the world gold market recently have helped many Vietnamese earn a fortune, but at least as many others have been cleaned out. Amateur investors are conspicuous in the latter group, having plunged in without good market information and all too often placing their bets with the help of dreams and horoscopes.
Nguyen Minh Tri, Director of Agribank’s Gold, Silver and Gemstone Company said that investors on the gold trading floors rarely ‘win.’ That’s because the gold price is influenced by many unpredictable factors, such as the crude oil price, the currency exchange rate and international politics.
According to Tri, a person with ten dong to invest should allocate two to gold. They should sell gold right away when they can make a profit instead of greedily waiting for a bigger profit.
The Deputy General Director of Asia Commercial Bank, Do Minh Toan, disagrees. Though it’s a high risk form of investment, he said, gold investors still have a lot of opportunities to earn fat profits.
Two experts consulted on stocks, Huynh Minh of Ban Viet Securities and Nguyen Ngoc Truong Chinh of Sen Vang Securities, said that if investors follow a long term investment plan instead of ‘surfing’ in and out of the market, they will always have opportunities.
We Vietnamese have always felt that tangible things like gold or real estate are ‘safer,’ Chinh noted. We think that we will still have ‘assets’ even when real estate or gold prices decrease, whereas we will lose everything if we invest in stocks and the companies go bankrupt.
Real estate market judged the least bad choice at present
Some speakers pointed out that investment preferences in Vietnam have been greatly influenced by changing Government policies, a sign of the market’s immaturity. Most investors just follow the crowd.
In 2006-2007, investors poured money into stocks. When the stock market cooled off, they rushed to ‘throw’ money into the real estate market. Then when there was a chill in real estate, many shifted to make speculative investments in gold. Such inconsistency rarely pays off.
Participants from the real estate sector called it the safest investment channel for investors who can’t afford to lose their money.
Thu Duc Housing Development Co. Chairman Le Chi Hieu declared “tourism real estate” the wave of the future. A top executive of Nova Real Estate Co. pointed out that in real estate, investors always have two options – they can either invest directly or through financial intermediaries.
Dr. Do Thi Loan, Secretary General of the HCM City Real Estate Association, advises people to choose real estate because of its reasonable profit and high safety.
However, Luong Tri Thin, Chairman of Dat Xanh, a construction and real estate company, pointed out that real estate investors remain vulnerable to legal uncertainties, “because the Government changes policies regularly.” Further, Thin argued, there’s a financial mismatch — real estate developers gnerally need to finance projects on a twenty to thirty year horizon but can only borrow money for a maximum term of 15 years.
VietNamNet/LD
Stock market: Foreigners in the dark (Vietnam)
Stock market: Foreigners in the dark
Last updated: Sunday, November 22, 2009 |
VnnNews - Many foreigners investing in Vietnamese securities are being deprived of shareholder rights.
Too many foreign investors have been left out in the cold during shareholder meetings
VnnNews - Many foreigners investing in Vietnamese securities are being deprived of shareholder rights.
Language and legal barriers and being left on the sidelines at annual shareholder meetings were common complaints voiced at a forum on strengthening listed companies’ corporate governance rules, held in Hanoi last week.
A foreign five-year stock market veteran said many companies he had invested in had not provided him with information or documents on upcoming annual shareholder meetings as required by law. As a result, he could not join or authorise anyone to join the meetings as a proxy voter.
However, listed firms said many individual foreign investors’ addresses were unclear with invitation letters and documents often bouncing back. The Vietnam Custody Centre proposed changes to listed firm sample charter regulations. The centre said that listed firms and share issuers must place information, including English-language documents, about shareholder meetings on their websites. Moreover, it claimed that firms must send information to the centre so it could inform investors.
The centre also suggested introducing rules similar to Singapore’s, regulating all foreign investors opening a Vietnamese securities trading account to register an address in Vietnam so listed firms and market regulators could send necessary information their way.
Dr Nguyen The Tho, head of the State Securities Committee’s Issuance Management Department, pledged he would focus on legal changes, including those relating to the sample charter, to address this obstacle. Tho said online annual shareholder meetings might help remove geographical problems for foreign investors.
Overseas-based foreign investors’ difficulties in delegating someone to join shareholder meetings were also a hot topic at the forum. To authorise someone, an authorisation letter must be sent to Vietnam via a Vietnamese diplomatic agency in the country the investor is residing in, before being translated into Vietnamese, notarised then sent to the company’s executives.
Tho said improved corporate governance was the key to dealing with these complaints. He said the market regulator was completing a regulatory framework on corporate governance, including clarification of authorisation issues. “Changes to the sample charter applied to listed firms, attached to Decision 15/2007-QD-BTC, would be introduced next year to assist stock market transparency.”
VietNamNet/VIR
http://www.vnnnews.net/stock-market-foreigners-in-the-dark
Last updated: Sunday, November 22, 2009 |
VnnNews - Many foreigners investing in Vietnamese securities are being deprived of shareholder rights.
Too many foreign investors have been left out in the cold during shareholder meetings
VnnNews - Many foreigners investing in Vietnamese securities are being deprived of shareholder rights.
Language and legal barriers and being left on the sidelines at annual shareholder meetings were common complaints voiced at a forum on strengthening listed companies’ corporate governance rules, held in Hanoi last week.
A foreign five-year stock market veteran said many companies he had invested in had not provided him with information or documents on upcoming annual shareholder meetings as required by law. As a result, he could not join or authorise anyone to join the meetings as a proxy voter.
However, listed firms said many individual foreign investors’ addresses were unclear with invitation letters and documents often bouncing back. The Vietnam Custody Centre proposed changes to listed firm sample charter regulations. The centre said that listed firms and share issuers must place information, including English-language documents, about shareholder meetings on their websites. Moreover, it claimed that firms must send information to the centre so it could inform investors.
The centre also suggested introducing rules similar to Singapore’s, regulating all foreign investors opening a Vietnamese securities trading account to register an address in Vietnam so listed firms and market regulators could send necessary information their way.
Dr Nguyen The Tho, head of the State Securities Committee’s Issuance Management Department, pledged he would focus on legal changes, including those relating to the sample charter, to address this obstacle. Tho said online annual shareholder meetings might help remove geographical problems for foreign investors.
Overseas-based foreign investors’ difficulties in delegating someone to join shareholder meetings were also a hot topic at the forum. To authorise someone, an authorisation letter must be sent to Vietnam via a Vietnamese diplomatic agency in the country the investor is residing in, before being translated into Vietnamese, notarised then sent to the company’s executives.
Tho said improved corporate governance was the key to dealing with these complaints. He said the market regulator was completing a regulatory framework on corporate governance, including clarification of authorisation issues. “Changes to the sample charter applied to listed firms, attached to Decision 15/2007-QD-BTC, would be introduced next year to assist stock market transparency.”
VietNamNet/VIR
http://www.vnnnews.net/stock-market-foreigners-in-the-dark
Speculation and Manipulation in the Vietnamese Stock Market
Swimming with shark
Last updated: Saturday, December 5, 2009 |
VnnNews – Predatory stock ‘sharks’ hunt in packs, grouping together to invest big money small-time companies to boost share prices and feast on profits.
Big-time investment “teams” whose members are known as “sharks” have been fixing stock prices by investing via several different accounts to manipulate market sentiment, a Thanh Nien investigation has found.
Though Vietnamese law only allows stock market investors to open one account at one brokerage firm, sharks use accounts opened by their friends and family to place buy and sell orders.
With combined financial resources of up to thousands of billions of dong (dozens of millions of dollars) bolstered by leverage from brokers, a team can fix the price of any stock with a flood of sell or buy orders.
Saigon Securities Inc. stocks were hit by a team of sharks earlier this year. The predators were able to push the price of the major blue-chip public company up nearly four-fold from mid March to early June, a shark in Hanoi told Thanh Nien.
But in many cases, the sharks focus less conspicuously on small or newly listed stocks. Thanh Nien found out that sharks had doubled stock prices at least three Hanoi-listed Song Da Corporation subsidiaries, as well Vinavico Company and the Education and Finance Investment Company, for short periods of time this year.
A shark told Thanh Nien that small companies with a chartered capital of less than VND50 billion were often the targets of big predators. The ideal firms to “hit,” he said, were those with 50 percent stakes owned by board members and other executives who are not allowed to sell within six months after the issue. He said Vietnam’s stock environment was perfect for sharks because it nurtures rumors that easily fuel price hikes.
At such companies, board members and executives’ relatives usually hold another 20 percent, so only about 30 percent of shares are actually traded in the market, a broker whose clients are mostly sharks told Thanh Nien.
“[Sharks] only need to buy about 1-2 million shares to be able to manipulate the market prices of that stock,” said the broker, who refused to be named.
The sharks’ manipulative power has become so strong that small investors, who once based their decisions on foreign investors‘ moves, now bet on shark intelligence.
VIPs
It’s no wonder that many brokerage companies who enjoy hefty fees from big-time investors welcome sharks as VIPs, offering them many privileges that in turn help multiply the sharks’ strength.
Since many brokerages are owned by banks, they are also able to offer attractive leverages. Most sharks only need to provide 20-30 percent of a security’s value for a purchase, the rest is funded by the brokers. In some special cases, the leverage could be as high as 9 to 1.
“It’s the leverage that helps create ‘super investors.’ Cash can’t,” a Hanoi-based shark told Thanh Nien, adding that very few investors actually possess hundreds of billions of dong in cash.
While normal investors can only sell a stock four days after they buy it, many brokers also let sharks sell a stock within three days of purchase, allowing them to make quick profits or retreat in times of strong market fluctuation.
Sharks and brokers have also joined hands to spread rumors and “reveal” information that can help them fix prices.
Such “intelligence” is in fact highly valued by many opportunistic investors who do not care about studying the official statistics of listed companies in which they want to buy stocks.
One such investor, known only as N.V.T., said the purchases made on “mainstream” stock consulting are like “buying government bonds.”
“Following sharks is risky but hugely profitable,” he said.
The limits of power
However, one shark, who preferred not to be named, told Thanh Nien that the big investment teams were in fact not that powerful.
“[Big-time investors] can fix prices successfully mostly because they follow market trends to inflate prices of a certain stocks. It’s not that they can manipulate the market at will,” she said.
“When the market becomes really bearish, not even the big-timers, nor even god, can push stock prices. Fleeing is the best policy then.”
Indeed, many sharks admitted that the bear market since late October had left many of them “soaked in blood” as their leverages – their beloved weapon – turned out to be double-edged swords.
Black Friday
The 23rd of October this year is a painful memory for many sharks. The VN-Index has been bearish since then, falling from the peak of 626,14 to under 500 this month. Within just 10 days of that dark Friday, the index plummeted by nearly 60 points.
“For 10 consecutive days, I lost VND1 billion each. It was so painful,” said a shark in Hanoi known as H. Stock brokerage companies, which had treated big investors like kings, began preying upon the predators to recover their loans.
H. said leaders at the brokerage where she had accounts told the media that they did not force investors to sell when the VNIndex fell.
“Indeed they did not have to force anyone,” H. said with sarcasm. “On their own, they sold investors’ stocks to get claim their debts.”
Many investors who had been leveraged 4-to-1 said their brokers sold their stocks after just two bearish sessions. This practice usually ignites a vicious circle: other investors, seeing bigger ones selling en masse, also rush to sell, which drives prices further into the deep south and thus inflicts even more damage to the sharks’ pocketbooks.
At the same time, the central bank recently asked brokers to strengthen a ban on short-selling stocks, reiterating that investors can sell only stocks that they own in their accounts, meaning the soonest they can sell a stock is four days after they buy it, nullifying the sharks’ advantage of first sale.
As a result, sharks have “bled all over the floor,” said an investor who requested anonymity.
Fall from grace
In a bearish market, big speculators are always ready to break their relations with, or even betray, their “teammates,” brokers told Thanh Nien.
“When the market is bullish, they work closely together to push prices and fix prices. Everyone is too happy looking in the same direction. But when the wind turns, everyone cares only for his fate,” a deputy CEO of a Ho Chi Minh City-based brokerage said.
Some sharks told Thanh Nien their “shoals” broke a few days around October 23 when some “teammates” secretly sold their stocks at low prices to cut losses while the teams had agreed to push prices to higher levels.
In one such case, a big-time team agreed to push Ha Nam Mineral Company (KSH) stock prices to VND100,000 apiece, a shark told Thanh Nien. But some members who sensed a market U-turn coming, secretly sold the stocks at just VND82,000. The team’s whole plot then collapsed, as did the stock price, which now stands at just around VND50,000.
Intelligence on big-time teams’ plans to fix prices, once eagerly sought, embraced and followed by small investors and even some brokers, is now shunned as fraudulent rumors the biggies set up to sell their own stocks.
In fact, the trust in the “biggies’ stock market control power” vanished within a week of October 23, some investors said. During that week, small investors more than once pinned high hopes on the return of the bull market based on rumors that sharks would push the prices of a certain number of stocks. It turned out later, however, that it was a trick the sharks used to clear their own stocks.
VietNamNet/Thanh Nien
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Sharks a valuable part of the food chain: Brokerage director
Le Dinh Ngoc, general director of the Hanoi-based Thang Long Securities Company said “shark” investors played a valuable role on the market, describing them as “professional investors.”
“They create demand. They merely invest in stocks and do not do anything else.”
Ngoc said the risks that these investors caused to the market should be considered side by side with the contributions they make.
His counterpart Nguyen Dinh Phong from VNDirect Securities Joint Stock Co., also in Hanoi, said shark investors created high liquidity and made trading more active.
These investors are also believed to enrich their brokerages as they pay brokering service fees of VND500 million to VND1 billion a month, a senior executive at another brokerage company said.
However leaders from other brokerages such as Bao Viet and Ban Viet said brokerages that offer privileges to VIP investors have robbed law-abiding brokerages and have helped big investors knock out smaller ones.
Nguyen Hoang Long, a small investor in Hanoi, said “When the market was rising, I could never buy although I tried many times, and I couldn’t sell either when the market was going down.”
Another investor in Hanoi named Le Thi Huong said in anger that “the stock market should be a transparent place that offers equal chances for anyone.”
A senior official from the State Securities Commission, who requested anonymity, told Thanh Nien “It is not that we don’t know about the pricing tricks, but investigating these claims and finding evidence to punish people involved is not easy.
“The investors can say they bought a certain stock because they found it promising. That’s not violating the law, for sure.”
A senior investigative officer from the commission said an investigation was possible but needed to be planned slowly and carefully, otherwise the commission would be shamed if both investors and brokerages manage to evade punishment.
http://www.vnnnews.net/swimming-with-shark
Last updated: Saturday, December 5, 2009 |
VnnNews – Predatory stock ‘sharks’ hunt in packs, grouping together to invest big money small-time companies to boost share prices and feast on profits.
Big-time investment “teams” whose members are known as “sharks” have been fixing stock prices by investing via several different accounts to manipulate market sentiment, a Thanh Nien investigation has found.
Though Vietnamese law only allows stock market investors to open one account at one brokerage firm, sharks use accounts opened by their friends and family to place buy and sell orders.
With combined financial resources of up to thousands of billions of dong (dozens of millions of dollars) bolstered by leverage from brokers, a team can fix the price of any stock with a flood of sell or buy orders.
Saigon Securities Inc. stocks were hit by a team of sharks earlier this year. The predators were able to push the price of the major blue-chip public company up nearly four-fold from mid March to early June, a shark in Hanoi told Thanh Nien.
But in many cases, the sharks focus less conspicuously on small or newly listed stocks. Thanh Nien found out that sharks had doubled stock prices at least three Hanoi-listed Song Da Corporation subsidiaries, as well Vinavico Company and the Education and Finance Investment Company, for short periods of time this year.
A shark told Thanh Nien that small companies with a chartered capital of less than VND50 billion were often the targets of big predators. The ideal firms to “hit,” he said, were those with 50 percent stakes owned by board members and other executives who are not allowed to sell within six months after the issue. He said Vietnam’s stock environment was perfect for sharks because it nurtures rumors that easily fuel price hikes.
At such companies, board members and executives’ relatives usually hold another 20 percent, so only about 30 percent of shares are actually traded in the market, a broker whose clients are mostly sharks told Thanh Nien.
“[Sharks] only need to buy about 1-2 million shares to be able to manipulate the market prices of that stock,” said the broker, who refused to be named.
The sharks’ manipulative power has become so strong that small investors, who once based their decisions on foreign investors‘ moves, now bet on shark intelligence.
VIPs
It’s no wonder that many brokerage companies who enjoy hefty fees from big-time investors welcome sharks as VIPs, offering them many privileges that in turn help multiply the sharks’ strength.
Since many brokerages are owned by banks, they are also able to offer attractive leverages. Most sharks only need to provide 20-30 percent of a security’s value for a purchase, the rest is funded by the brokers. In some special cases, the leverage could be as high as 9 to 1.
“It’s the leverage that helps create ‘super investors.’ Cash can’t,” a Hanoi-based shark told Thanh Nien, adding that very few investors actually possess hundreds of billions of dong in cash.
While normal investors can only sell a stock four days after they buy it, many brokers also let sharks sell a stock within three days of purchase, allowing them to make quick profits or retreat in times of strong market fluctuation.
Sharks and brokers have also joined hands to spread rumors and “reveal” information that can help them fix prices.
Such “intelligence” is in fact highly valued by many opportunistic investors who do not care about studying the official statistics of listed companies in which they want to buy stocks.
One such investor, known only as N.V.T., said the purchases made on “mainstream” stock consulting are like “buying government bonds.”
“Following sharks is risky but hugely profitable,” he said.
The limits of power
However, one shark, who preferred not to be named, told Thanh Nien that the big investment teams were in fact not that powerful.
“[Big-time investors] can fix prices successfully mostly because they follow market trends to inflate prices of a certain stocks. It’s not that they can manipulate the market at will,” she said.
“When the market becomes really bearish, not even the big-timers, nor even god, can push stock prices. Fleeing is the best policy then.”
Indeed, many sharks admitted that the bear market since late October had left many of them “soaked in blood” as their leverages – their beloved weapon – turned out to be double-edged swords.
Black Friday
The 23rd of October this year is a painful memory for many sharks. The VN-Index has been bearish since then, falling from the peak of 626,14 to under 500 this month. Within just 10 days of that dark Friday, the index plummeted by nearly 60 points.
“For 10 consecutive days, I lost VND1 billion each. It was so painful,” said a shark in Hanoi known as H. Stock brokerage companies, which had treated big investors like kings, began preying upon the predators to recover their loans.
H. said leaders at the brokerage where she had accounts told the media that they did not force investors to sell when the VNIndex fell.
“Indeed they did not have to force anyone,” H. said with sarcasm. “On their own, they sold investors’ stocks to get claim their debts.”
Many investors who had been leveraged 4-to-1 said their brokers sold their stocks after just two bearish sessions. This practice usually ignites a vicious circle: other investors, seeing bigger ones selling en masse, also rush to sell, which drives prices further into the deep south and thus inflicts even more damage to the sharks’ pocketbooks.
At the same time, the central bank recently asked brokers to strengthen a ban on short-selling stocks, reiterating that investors can sell only stocks that they own in their accounts, meaning the soonest they can sell a stock is four days after they buy it, nullifying the sharks’ advantage of first sale.
As a result, sharks have “bled all over the floor,” said an investor who requested anonymity.
Fall from grace
In a bearish market, big speculators are always ready to break their relations with, or even betray, their “teammates,” brokers told Thanh Nien.
“When the market is bullish, they work closely together to push prices and fix prices. Everyone is too happy looking in the same direction. But when the wind turns, everyone cares only for his fate,” a deputy CEO of a Ho Chi Minh City-based brokerage said.
Some sharks told Thanh Nien their “shoals” broke a few days around October 23 when some “teammates” secretly sold their stocks at low prices to cut losses while the teams had agreed to push prices to higher levels.
In one such case, a big-time team agreed to push Ha Nam Mineral Company (KSH) stock prices to VND100,000 apiece, a shark told Thanh Nien. But some members who sensed a market U-turn coming, secretly sold the stocks at just VND82,000. The team’s whole plot then collapsed, as did the stock price, which now stands at just around VND50,000.
Intelligence on big-time teams’ plans to fix prices, once eagerly sought, embraced and followed by small investors and even some brokers, is now shunned as fraudulent rumors the biggies set up to sell their own stocks.
In fact, the trust in the “biggies’ stock market control power” vanished within a week of October 23, some investors said. During that week, small investors more than once pinned high hopes on the return of the bull market based on rumors that sharks would push the prices of a certain number of stocks. It turned out later, however, that it was a trick the sharks used to clear their own stocks.
VietNamNet/Thanh Nien
----
Sharks a valuable part of the food chain: Brokerage director
Le Dinh Ngoc, general director of the Hanoi-based Thang Long Securities Company said “shark” investors played a valuable role on the market, describing them as “professional investors.”
“They create demand. They merely invest in stocks and do not do anything else.”
Ngoc said the risks that these investors caused to the market should be considered side by side with the contributions they make.
His counterpart Nguyen Dinh Phong from VNDirect Securities Joint Stock Co., also in Hanoi, said shark investors created high liquidity and made trading more active.
These investors are also believed to enrich their brokerages as they pay brokering service fees of VND500 million to VND1 billion a month, a senior executive at another brokerage company said.
However leaders from other brokerages such as Bao Viet and Ban Viet said brokerages that offer privileges to VIP investors have robbed law-abiding brokerages and have helped big investors knock out smaller ones.
Nguyen Hoang Long, a small investor in Hanoi, said “When the market was rising, I could never buy although I tried many times, and I couldn’t sell either when the market was going down.”
Another investor in Hanoi named Le Thi Huong said in anger that “the stock market should be a transparent place that offers equal chances for anyone.”
A senior official from the State Securities Commission, who requested anonymity, told Thanh Nien “It is not that we don’t know about the pricing tricks, but investigating these claims and finding evidence to punish people involved is not easy.
“The investors can say they bought a certain stock because they found it promising. That’s not violating the law, for sure.”
A senior investigative officer from the commission said an investigation was possible but needed to be planned slowly and carefully, otherwise the commission would be shamed if both investors and brokerages manage to evade punishment.
http://www.vnnnews.net/swimming-with-shark
Gold price slumps as dollar strengthens
Gold price slumps as dollar strengthens
The gold price has hit a number of all-time highs in recent weeks
The gold price has slumped after surprisingly good US unemployment data sent the US dollar higher, making gold a less attractive investment.
Gold fell more than $65, or 5%, to $1,161.4 an ounce, down from a record high of $1,226.56 in early trading.
After figures showed the US jobless rate falling, the dollar gained 2% on the Japanese yen and 1.3% on the euro.
Gold has hit a number of record highs in recent weeks as the dollar weakened due to low interest rates in the US.
'Teeth kicking'
Both the dollar and gold are seen as safe investments, but investors have preferred gold in recent months due to the weak dollar.
The US has said it will maintain low interest rates for some time, which makes the dollar less attractive.
But the sudden strengthening of the dollar has now sent the gold price sharply lower.
The dollar rose on the back of data which showed that the US unemployment rate fell in November to 10%, down from 10.2% in October.
In all, 11,000 jobs went over the month - the smallest number since the recession began in December 2007. That was far fewer than the 130,000 expected by most analysts.
The dollar rose against the euro, to $1.4889, and against the yen, to 90 yen.
"So many people have piled into gold, so this pop in the dollar is freaking people out," said Matt Zeman at LaSalle Futures Group.
"The dollar is rocking and gold is getting its teeth kicked in."
http://news.bbc.co.uk/2/hi/business/8396542.stm
The gold price has hit a number of all-time highs in recent weeks
The gold price has slumped after surprisingly good US unemployment data sent the US dollar higher, making gold a less attractive investment.
Gold fell more than $65, or 5%, to $1,161.4 an ounce, down from a record high of $1,226.56 in early trading.
After figures showed the US jobless rate falling, the dollar gained 2% on the Japanese yen and 1.3% on the euro.
Gold has hit a number of record highs in recent weeks as the dollar weakened due to low interest rates in the US.
'Teeth kicking'
Both the dollar and gold are seen as safe investments, but investors have preferred gold in recent months due to the weak dollar.
The US has said it will maintain low interest rates for some time, which makes the dollar less attractive.
But the sudden strengthening of the dollar has now sent the gold price sharply lower.
The dollar rose on the back of data which showed that the US unemployment rate fell in November to 10%, down from 10.2% in October.
In all, 11,000 jobs went over the month - the smallest number since the recession began in December 2007. That was far fewer than the 130,000 expected by most analysts.
The dollar rose against the euro, to $1.4889, and against the yen, to 90 yen.
"So many people have piled into gold, so this pop in the dollar is freaking people out," said Matt Zeman at LaSalle Futures Group.
"The dollar is rocking and gold is getting its teeth kicked in."
http://news.bbc.co.uk/2/hi/business/8396542.stm
Global recession timeline
How did the credit crunch at the end of 2007 become a full financial meltdown by the middle of 2008, and finally turn into a global recession?
This interactive timeline highlights key dates in the financial collapse and helps you find the original reports of the events as they happened.
Click on an event on the timeline here: http://news.bbc.co.uk/2/hi/business/8242825.stm
8 February 2007: HSBC WARNS OF SUBPRIME LOSSES
HSBC reveals huge losses at its US mortgage arm Household Finance due to subprime losses, in one of the first signs that the US housing market is turning sour, and that it could have a knock-on effect on the global financial sector.
2 April 2007: NEW CENTURY GOES BUST
New Century Financial, a leading subprime lender, files for bankruptcy. It is the first signal that something is seriously amiss at US mortgage lenders. Shares in other US mortgages banks like Countrywide come under pressure.
9 August 2007: CREDIT MARKETS FREEZE
Credit markets go into freefall after Paribas announces that two of its hedge funds are frozen due to "complete evaporation of liquidity" in asset backed security market. European Central Bank injects 170bn euros into the banking market and Fed lowers interest rates. Bank of England refuses to intervene in credit markets.
14 September 2007: RUN ON THE ROCK
Savers in beleaguered UK former building society Northern Rock begin withdrawing their savings after the BBC reveals the bank has received emergency financial support from the Bank of England. Northern Rock is in trouble as it was heavily reliant on the wholesale money market to fund its operations, and these markets have dried up.
17 March 2008: BEAR STEARNS RESCUE
US investment bank Bear Stearns is rescued by rival bank JP Morgan Chase after the US government provides a $30bn guarantee against its mounting losses. It is the first sign that, rather than easing, the financial crisis is getting worse but investors are relieved that US government prepared to act as lender of last resort.
7 September 2008: FANNIE MAE RESCUE
US government rescues giant mortgage lenders Fannie Mae and Freddie Mac, taking them into temporary public ownership after they reveal huge losses on the US subprime mortgage market. Their failure would have triggered a run on the dollar as many foreign governments had invested in their bonds, believing they were already guaranteed by the government.
15 September 2008: LEHMAN BROTHERS GOES BANKRUPT
US investment bank Lehman Brothers goes bankrupt after the US government refuses to bail it out. Merrill Lynch is bought by Bank of America after revealing it also is facing huge losses. Insurance firm AIG, which issued credit guarantees for subprime mortgages, is rescued the next day with an $85bn loan from US Treasury.
17 September 2008: LLOYDS TAKES OVER HBOS
Lloyds agrees a £12.2bn takeover of the ailing Halifax Bank of Scotland (HBOS), the UK's largest mortgage lender, after its shares plummet amid concerns over the firm's future. The UK government invokes a national interest clause to bypass competition law, as the new bank is responsible for close to one-third of the UK's savings and mortgage market.
3 October 2008: $700BN BAILOUT APPROVED BY CONGRESS
The biggest financial rescue in US history is approved after a gruelling debate in Congress, and initial defeat a week earlier. Republicans and Democrats alike were reluctant to bail out the banks with such large sums while ordinary citizens were suffering in the recession. Both presidential candidates endorse the bail-out.
13 October 2008: UK GOVERNMENT RESCUES RBS AND LLOYDS-HBOS
Two of the UK's major banks, RBS and HBOS, are in major trouble as financial markets collapse. Having merged with HBOS in September, Lloyds is hit by the huge debts built up by its new partner in the mortgage market, while RBS is struggling with its expensive merger with ABN-AMRO. The UK government injects £37bn to stabilise both banks.
16 December 2008: FED CUTS KEY RATE TO NEAR ZERO
The US central bank cuts its interest rate to 0 - 0.25% in an attempt to stem the deepening recession, and begins to consider a programme of quantitative easing to throw money into the economy to help make borrowing easier. It is the lowest interest in the history of the Fed.
14 February 2009: US CONGRESS PASSES $787BN STIMULUS
President Obama wins his first major victory in Congress as it passes a huge economic recovery plan aimed at preventing the US falling into recession as a result of the credit crunch. Much of the money will go to the states to prevent them laying off public sector workers, but some will be invested in infrastructure projects like roads, schools and green energy.
2 April 2009: G20 SUMMIT IN LONDON
World leaders pledge an additional $1.1 trillion to help emerging market countries and promise coordinated action to fight the slump and improve regulation. Gordon Brown emerges triumphant from a global summit, which he claims is a turning point in the crisis, and stock markets begin to revive. However, not all the money pledged is actually delivered.
22 April 2009: UK BUDGET REVEALS HUGE DEFICIT
The UK Chancellor Alistair Darling reveals that the credit crunch will lead to the largest budget deficit in UK financial history of £175bn, with total government debt set to double to £1 trillion by 2014. Mr Darling admits it will take two Parliaments, or 10 years to get the budget back to the position it was in before the credit crunch.
Well, what did you do with your portfolio of stocks during each of the above periods?
Lessons drawn from this crisis:
1. The recession was rather a long one. The start was when HSBC first announced the problems with US subprime loans in February 2007. However, the severity of the crisis was uncertain in the beginning. Our local Tan Teng Boo dismissed the subprime as of insignificant size to dent the financial market. However, he failed to predict the subsequent events. Those who took his advice endured the pain of the forthcoming severe downturn.
2. The crisis was better explained by reading financial articles of the US, UK, Australia and other countries. Those reading the local press were unlikely to get the whole big picture of the financial problems that subsequently unfolded. Reading widely gave a more balanced views. However, faced with uncertainties, there were conflicting views given by many "experts".
3. The local gneral election of March 08 did not affect the local market much despite the BN losing 5 states. Presumably, the economic and political risks were already factored in the index then.
4. The Lehman crisis brought a precipitous fall in the market. Those who panicked and sold after the fall would have fallen to the folly of the market - buying high and selling low - being driven by fear in a falling market. The better approach then would be to do nothing. So many a time, so much losses came about because one has to do something, when one would have been better to just do nothing. The braver and smarter ones actually bought into the market, though on hindsight, this was still 6 months too early.
5. It is difficult to time the market. It is better to be approximately right than to be exactly wrong. Warren Buffett was right when he asked people to buy in October 2008. To do likewise, one has to be wired appropriately - this is certainly possible through a deeper understanding of the market, the stocks and behavioural finance.
6. Buy and hold is a safe strategy for selected stocks.
7. The market is cyclical. After a downturn of 20% or more, the ghost of the 1929 prolonged Great Recession was resurrected causing fear to investors. This occured also in previous downturns. Just as the market cannot rise forever relentless, similarly, it cannot fall forever unabated. After a severe prolonged downturn, try to call the near-bottom if you can to pick up the underpriced valued stocks. Similarly, in a prolonged bull market, try to call the near-top to cash out of some of the overpriced stocks.
How much longer will the rally last? All good things have to come to an end.
How much longer will the rally last?
At the end of each month, BBC World News business presenter Jamie Robertson takes a look at the world's major stock markets. This month he considers what will happen when the global rally comes to a halt.
--------------------------------------------------------------------------------
The price of copper has almost doubled in the past year
A world where everything is going up in price and inflation is close to zero should be a happy and contented place.
It is not quite turning out that way.
Investors cannot put the idea out of their minds that all good things have to come to an end.
It is just no one yet can figure out how - or how messy an end it is going to be.
Huge gains
First, the good news.
Had you invested in a spread of Dow stocks a year ago you would have seen a 24% gain - despite the virtual wipe-out in the spring. The Nasdaq has seen a 51% gain, the FTSE 29%.
Bonds, treasuries as well as corporate bonds, have all shown healthy returns - even though they traditionally head in the opposite direction to stocks, benefiting from low growth scenarios. Copper is up almost 100%.
Early this year, metals prices started to lose touch with fundamentals
Andrew Cole, analyst
It seems everything investors have touched has turned to gold - which, I might add, is up over 70% on the year.
And that's without even mentioning some of the super-performers: the miners Fresnillo and Kazakhmys have risen - wait for it - 597% and 516% respectively.
Now these numbers have a somewhat narrow relevance in that November last year marked the low point for many commodity stocks, while the bulk of the global markets hit bottom in March.
Nevertheless, the point is we are riding a bull market goaded on by an indiscriminate, possibly blind and certainly irrational exuberance.
Commodity boom
The exuberance comes from cheap money.
As long as the liquidity remains the market will not fail, but we all know that at some point monetary policy will start to tighten and the stimulus packages will run out.
Then as fundamentals start to come back into play, which of the markets will turn out to have been an illusion?
The date of this turn-around seems to be around the middle to end of next year.
A number of economists are pointing to June or July for a raising of interest rates in the euro-zone, while the US is likely to wait until the end of the year.
However, markets are very good at pre-empting these things and they may well stumble several months before the actual moves are made.
Commodity prices are particularly sensitive to the Chinese economy that really lifted them out of their trough at the end of 2008, and the weakness of the dollar.
Investors moved money into commodities as a hedge against the dollar and a bet on recovery aided, if not led by China. But, again, it is the weight of money that has caused the rises.
So it is no accident that mining companies dominate the list of best performers on the FTSE 100 over the last year.
'Very shaky'
But Andrew Cole, metals analyst at Metal Bulletin, said: "Early this year, metals prices started to lose touch with fundamentals, which are still pretty poor.
"Outside of China, demand has still not picked up. There is a lot of risk and demand is very shaky. And there is no sign that stockpiles are coming down either.
Those who invested a year ago have had a good run
"But the truth is that investors are looking for places to put cash, and metals still look like a good bet," he added.
The trigger point for a commodity sell-off could be a strengthening of the dollar (or a corresponding weakening of the euro), especially if it happens in conjunction with a slowing of the Chinese stimulus package and a tightening of monetary policy, all of which are possible at varying points over the next 12 months.
The bond market is perhaps the most curious bull market of all, since it seems to be built on such a colossal supply of debt.
While the Dubai crisis rocked the sovereign debt markets - there was no real fear of a sovereign default as Dubai World is a state-owned company, not the state itself.
The real worries are closer to home in Greece, Ireland and Hungary.
UK concerns
Deutsche Bank believes Greece's public debt-to-GDP ratio could soon reach 135%. Meanwhile in the UK if the government doesn't get to grips with its debt in the next 12 months, the bull market in treasuries there may also come to an abrupt halt.
But, and here's the twist, if it does get to grips with it, such self-discipline could mean curtains for the equity bull market.
Howard Wheeldon, senior Strategist at BGC Partners, believes the US has a diverse and dynamic enough economy to continue its recovery.
But he paints a gloomy picture for the UK: "What will happen then to equities when they start slashing jobs in the public sector, when they start putting up taxes, ending the subsidies to things like car buying, and start doing all the things they have to do to bring the debt under control?
"Many of the equities in the UK have a cushion in that they have a great deal of exposure to the international economy, but the effect on the UK economy of all that austerity is going to be profound."
http://news.bbc.co.uk/2/hi/business/8393574.stm
At the end of each month, BBC World News business presenter Jamie Robertson takes a look at the world's major stock markets. This month he considers what will happen when the global rally comes to a halt.
--------------------------------------------------------------------------------
The price of copper has almost doubled in the past year
A world where everything is going up in price and inflation is close to zero should be a happy and contented place.
It is not quite turning out that way.
Investors cannot put the idea out of their minds that all good things have to come to an end.
It is just no one yet can figure out how - or how messy an end it is going to be.
Huge gains
First, the good news.
Had you invested in a spread of Dow stocks a year ago you would have seen a 24% gain - despite the virtual wipe-out in the spring. The Nasdaq has seen a 51% gain, the FTSE 29%.
Bonds, treasuries as well as corporate bonds, have all shown healthy returns - even though they traditionally head in the opposite direction to stocks, benefiting from low growth scenarios. Copper is up almost 100%.
Early this year, metals prices started to lose touch with fundamentals
Andrew Cole, analyst
It seems everything investors have touched has turned to gold - which, I might add, is up over 70% on the year.
And that's without even mentioning some of the super-performers: the miners Fresnillo and Kazakhmys have risen - wait for it - 597% and 516% respectively.
Now these numbers have a somewhat narrow relevance in that November last year marked the low point for many commodity stocks, while the bulk of the global markets hit bottom in March.
Nevertheless, the point is we are riding a bull market goaded on by an indiscriminate, possibly blind and certainly irrational exuberance.
Commodity boom
The exuberance comes from cheap money.
As long as the liquidity remains the market will not fail, but we all know that at some point monetary policy will start to tighten and the stimulus packages will run out.
Then as fundamentals start to come back into play, which of the markets will turn out to have been an illusion?
The date of this turn-around seems to be around the middle to end of next year.
A number of economists are pointing to June or July for a raising of interest rates in the euro-zone, while the US is likely to wait until the end of the year.
However, markets are very good at pre-empting these things and they may well stumble several months before the actual moves are made.
Commodity prices are particularly sensitive to the Chinese economy that really lifted them out of their trough at the end of 2008, and the weakness of the dollar.
Investors moved money into commodities as a hedge against the dollar and a bet on recovery aided, if not led by China. But, again, it is the weight of money that has caused the rises.
So it is no accident that mining companies dominate the list of best performers on the FTSE 100 over the last year.
'Very shaky'
But Andrew Cole, metals analyst at Metal Bulletin, said: "Early this year, metals prices started to lose touch with fundamentals, which are still pretty poor.
"Outside of China, demand has still not picked up. There is a lot of risk and demand is very shaky. And there is no sign that stockpiles are coming down either.
Those who invested a year ago have had a good run
"But the truth is that investors are looking for places to put cash, and metals still look like a good bet," he added.
The trigger point for a commodity sell-off could be a strengthening of the dollar (or a corresponding weakening of the euro), especially if it happens in conjunction with a slowing of the Chinese stimulus package and a tightening of monetary policy, all of which are possible at varying points over the next 12 months.
The bond market is perhaps the most curious bull market of all, since it seems to be built on such a colossal supply of debt.
While the Dubai crisis rocked the sovereign debt markets - there was no real fear of a sovereign default as Dubai World is a state-owned company, not the state itself.
The real worries are closer to home in Greece, Ireland and Hungary.
UK concerns
Deutsche Bank believes Greece's public debt-to-GDP ratio could soon reach 135%. Meanwhile in the UK if the government doesn't get to grips with its debt in the next 12 months, the bull market in treasuries there may also come to an abrupt halt.
But, and here's the twist, if it does get to grips with it, such self-discipline could mean curtains for the equity bull market.
Howard Wheeldon, senior Strategist at BGC Partners, believes the US has a diverse and dynamic enough economy to continue its recovery.
But he paints a gloomy picture for the UK: "What will happen then to equities when they start slashing jobs in the public sector, when they start putting up taxes, ending the subsidies to things like car buying, and start doing all the things they have to do to bring the debt under control?
"Many of the equities in the UK have a cushion in that they have a great deal of exposure to the international economy, but the effect on the UK economy of all that austerity is going to be profound."
http://news.bbc.co.uk/2/hi/business/8393574.stm
Singapore’s rich optimistic on property prices, survey finds
Singapore’s rich optimistic on property prices, survey finds
Written by Bloomberg
Thursday, 03 December 2009 15:27
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Singapore’s rich are among the most optimistic of global investors on real estate, expecting the value of their property holdings to rise in the next two years, according to a survey.
Fifty-three percent of Singapore investors forecast prices to increase, more than the 49% of respondents globally, the survey by Barclays Wealth and the Economist Intelligence Unit found. The survey of 2,000 people with investable assets of more than US$800,000 ($1.1 million) was taken in August and September.
Home prices in Singapore rose 15.8% in the third quarter, the first increase in more than a year, according to the Urban Redevelopment Authority. Transactions declined since peaking in July, and private home sales slowed for a third straight month in October, the authority said.
“While it can be tempting to seek refuge in property as a safe haven, investors must be careful to avoid overexposure to an asset class that has traditionally proven to be susceptible to economic cycles,” said Didier von Daeniken, chief executive of Barclays Wealth Asia Pacific, in a statement released today with the survey.
Singapore has said it will sell more land sites and ban interest-only mortgages for uncompleted homes as part of measures to prevent excessive price swings. Last month, its central bank said it may be “necessary” to implement more measures to counter real-estate market speculation.
Singapore investors said they plan to raise their property investments from the current average of 25% of their portfolio, the survey stated.
Investors from India and Canada were the most optimistic, according to the survey, with 56% and 55%, respectively, expecting price increases.
Written by Bloomberg
Thursday, 03 December 2009 15:27
Share this
Singapore’s rich are among the most optimistic of global investors on real estate, expecting the value of their property holdings to rise in the next two years, according to a survey.
Fifty-three percent of Singapore investors forecast prices to increase, more than the 49% of respondents globally, the survey by Barclays Wealth and the Economist Intelligence Unit found. The survey of 2,000 people with investable assets of more than US$800,000 ($1.1 million) was taken in August and September.
Home prices in Singapore rose 15.8% in the third quarter, the first increase in more than a year, according to the Urban Redevelopment Authority. Transactions declined since peaking in July, and private home sales slowed for a third straight month in October, the authority said.
“While it can be tempting to seek refuge in property as a safe haven, investors must be careful to avoid overexposure to an asset class that has traditionally proven to be susceptible to economic cycles,” said Didier von Daeniken, chief executive of Barclays Wealth Asia Pacific, in a statement released today with the survey.
Singapore has said it will sell more land sites and ban interest-only mortgages for uncompleted homes as part of measures to prevent excessive price swings. Last month, its central bank said it may be “necessary” to implement more measures to counter real-estate market speculation.
Singapore investors said they plan to raise their property investments from the current average of 25% of their portfolio, the survey stated.
Investors from India and Canada were the most optimistic, according to the survey, with 56% and 55%, respectively, expecting price increases.
Basic Knowledge for International Investing
Evaluating Country Risk For International Investing
http://myinvestingnotes.blogspot.com/2009/12/evaluating-country-risk-for.html
Malaysia's economy stagnant, needs reform
http://myinvestingnotes.blogspot.com/2009/12/malaysias-economy-stagnant-needs-reform.html
Economics Basics: What Is Economics?
http://myinvestingnotes.blogspot.com/2009/12/economics-basics-what-is-economics.html
What is GDP and why is it so important?
http://myinvestingnotes.blogspot.com/2009/12/what-is-gdp-and-why-is-it-so-important.html
What Is The Balance Of Payments?
http://myinvestingnotes.blogspot.com/2009/12/what-is-balance-of-payments.html
Understanding The Current Account In The Balance Of Payments
http://myinvestingnotes.blogspot.com/2009/12/understanding-current-account-in.html
Current Account Deficits: Government Investment Or Irresponsibility?
http://myinvestingnotes.blogspot.com/2009/12/current-account-deficits-government.html
What is a trade deficit and what effect will it have on the stock market?
http://myinvestingnotes.blogspot.com/2009/12/what-is-trade-deficit-and-what-effect.html
What is RISK? Equity investment is the most risky investment in all the financial markets.
http://myinvestingnotes.blogspot.com/2009/12/what-is-risk-equity-investment-is-most.html
http://myinvestingnotes.blogspot.com/2009/12/evaluating-country-risk-for.html
Malaysia's economy stagnant, needs reform
http://myinvestingnotes.blogspot.com/2009/12/malaysias-economy-stagnant-needs-reform.html
Economics Basics: What Is Economics?
http://myinvestingnotes.blogspot.com/2009/12/economics-basics-what-is-economics.html
What is GDP and why is it so important?
http://myinvestingnotes.blogspot.com/2009/12/what-is-gdp-and-why-is-it-so-important.html
What Is The Balance Of Payments?
http://myinvestingnotes.blogspot.com/2009/12/what-is-balance-of-payments.html
Understanding The Current Account In The Balance Of Payments
http://myinvestingnotes.blogspot.com/2009/12/understanding-current-account-in.html
Current Account Deficits: Government Investment Or Irresponsibility?
http://myinvestingnotes.blogspot.com/2009/12/current-account-deficits-government.html
What is a trade deficit and what effect will it have on the stock market?
http://myinvestingnotes.blogspot.com/2009/12/what-is-trade-deficit-and-what-effect.html
What is RISK? Equity investment is the most risky investment in all the financial markets.
http://myinvestingnotes.blogspot.com/2009/12/what-is-risk-equity-investment-is-most.html
Saturday 5 December 2009
Never Use P/E Ratios in Isolation
Different Types of P/E Ratios
It's important to understand that all P/E ratios are not created equally. Some are calculated using earnings from the past four quarters (known as a trailing P/E). Meanwhile, others use earnings from the last two quarters, plus projected earnings for the next two quarters (known as a current P/E). Finally, some are calculated based entirely on future earnings estimates (known as a forward P/E).
Caution must be used when examining forward P/E ratios, as future growth estimates may ultimately prove to be inaccurate. Also, the underlying earnings used in the P/E calculation can vary from source to source. Some analysts, for example, choose to work with adjusted earnings figures, which exclude one-time gains or losses. Meanwhile, others prefer to use net income figures calculated based on traditional GAAP rules.
Never Use P/E Ratios in Isolation
Although a P/E ratio can provide a good approximation of how "expensive" a particular stock is relative to its underlying earnings stream, it is by no means a perfect gauge of a company's value. P/E ratios have a number of drawbacks, including:
-- Earnings Manipulation -- Companies often use a variety of accounting techniques to alter their reported net income. As a result, the reported earnings figures we read about are often not entirely representative of a company's true financial situation. Since net income is a critical component of a firm's P/E ratio, manipulated earnings can lead to misleading P/E data.
-- Industry Differences -- Different industries typically have different historical growth rates, risk levels, etc... and hence different average P/E ratios. Thus, stocks that may appear cheap in one industry may look expensive when stacked up against another. For this reason, it is typically more appropriate to compare a firm's P/E ratio to those of other companies within the same sector.
-- Other Factors -- It's important to remember that P/E ratios only take two items into account -- a firm's current stock price and its net income. As a result, P/E ratios completely ignore a variety of other important factors. One of the most notable of these factors is a firm's projected future growth rate. Two stocks could be identical in every respect (including on a P/E basis), but if one company is growing at twice the rate of the other firm, then the high-growth firm will likely make a better investment over the long haul. With this in mind, many investors prefer to examine PEG ratios as opposed to traditional P/E ratios.
-- Volatility and Risk -- P/E ratios also ignore such critical items as risk and volatility. Two firm's may sport identical P/E ratios, but if one firm's revenue and earnings base is extremely reliable, yet the other firm's earnings are highly uncertain, then the more reliable firm could make a better investment over the long haul.
With the above limitations in mind, when attempting to assess the value of a particular security, most experienced investors choose to analyze P/E ratios in conjunction with a variety of other ratios, including Price/Sales (P/S), Price/Cash Flow (P/CF), etc...
http://web.streetauthority.com/terms/p/pe-ratio.asp
It's important to understand that all P/E ratios are not created equally. Some are calculated using earnings from the past four quarters (known as a trailing P/E). Meanwhile, others use earnings from the last two quarters, plus projected earnings for the next two quarters (known as a current P/E). Finally, some are calculated based entirely on future earnings estimates (known as a forward P/E).
Caution must be used when examining forward P/E ratios, as future growth estimates may ultimately prove to be inaccurate. Also, the underlying earnings used in the P/E calculation can vary from source to source. Some analysts, for example, choose to work with adjusted earnings figures, which exclude one-time gains or losses. Meanwhile, others prefer to use net income figures calculated based on traditional GAAP rules.
Never Use P/E Ratios in Isolation
Although a P/E ratio can provide a good approximation of how "expensive" a particular stock is relative to its underlying earnings stream, it is by no means a perfect gauge of a company's value. P/E ratios have a number of drawbacks, including:
-- Earnings Manipulation -- Companies often use a variety of accounting techniques to alter their reported net income. As a result, the reported earnings figures we read about are often not entirely representative of a company's true financial situation. Since net income is a critical component of a firm's P/E ratio, manipulated earnings can lead to misleading P/E data.
-- Industry Differences -- Different industries typically have different historical growth rates, risk levels, etc... and hence different average P/E ratios. Thus, stocks that may appear cheap in one industry may look expensive when stacked up against another. For this reason, it is typically more appropriate to compare a firm's P/E ratio to those of other companies within the same sector.
-- Other Factors -- It's important to remember that P/E ratios only take two items into account -- a firm's current stock price and its net income. As a result, P/E ratios completely ignore a variety of other important factors. One of the most notable of these factors is a firm's projected future growth rate. Two stocks could be identical in every respect (including on a P/E basis), but if one company is growing at twice the rate of the other firm, then the high-growth firm will likely make a better investment over the long haul. With this in mind, many investors prefer to examine PEG ratios as opposed to traditional P/E ratios.
-- Volatility and Risk -- P/E ratios also ignore such critical items as risk and volatility. Two firm's may sport identical P/E ratios, but if one firm's revenue and earnings base is extremely reliable, yet the other firm's earnings are highly uncertain, then the more reliable firm could make a better investment over the long haul.
With the above limitations in mind, when attempting to assess the value of a particular security, most experienced investors choose to analyze P/E ratios in conjunction with a variety of other ratios, including Price/Sales (P/S), Price/Cash Flow (P/CF), etc...
http://web.streetauthority.com/terms/p/pe-ratio.asp
The growth in stock returns came mostly from earnings growth
"The growth in stock returns came mostly from earnings growth," says Peng Chen, chief investment officer at Ibbotson Associates.
Company Valuation: NAV and DCF
Company Valuation
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Whenever people talk about equity investments, one must have come across the word "Valuation". In financial parlance, Valuation means how much a company is worth of. Talking about equity investments, one should have an understanding of valuation.
Valuation means the intrinsic worth of the company. There are various methods through which one can measure the intrinsic worth of a company. This section is aimed at providing a basic understanding of these methods of valuation. They are mentioned below:
Net Asset Value (NAV)
NAV or Book value is one of the most commonly used methods of valuation. As the name suggests, it is the net value of all the assets of the company. If you divide it by the number of outstanding shares, you get the NAV per share.
One way to calculate NAV is to divide the net worth of the company by the total number of oooutstanding shares. Say, a company’s share capital is Rs. 100 crores (10 crores shares of Rs. 10 each) and its reserves and surplus is another Rs. 100 crores. Net worth of the company would be Rs. 200 crores (equity and reserves) and NAV would be Rs. 20 per share (Rs. 200 crores divided by 10 crores outstanding shares).
NAV can also be calculated by adding all the assets and subtracting all the outside liabilities from them. This will again boil down to net worth only. One can use any of the two methods to find out NAV.
One can compare the NAV with the going market price while taking investment decisions.
Discounted Cash Flows Method (DCF)
DCF is the most widely used technique to value a company. It takes into consideration the cash flows arising to the company and also the time value of money. That’s why, it is so popular. What actually happens in this is, the cash flows are calculated for a particular period of time (the time period is fixed taking into consideration various factors). These cash flows are discounted to the present at the cost of capital of the company. These discounted cash flows are then divided by the total number of outstanding shares to get the intrinsic worth per share.
--------------------------------------------------------------------------------
Whenever people talk about equity investments, one must have come across the word "Valuation". In financial parlance, Valuation means how much a company is worth of. Talking about equity investments, one should have an understanding of valuation.
Valuation means the intrinsic worth of the company. There are various methods through which one can measure the intrinsic worth of a company. This section is aimed at providing a basic understanding of these methods of valuation. They are mentioned below:
Net Asset Value (NAV)
NAV or Book value is one of the most commonly used methods of valuation. As the name suggests, it is the net value of all the assets of the company. If you divide it by the number of outstanding shares, you get the NAV per share.
One way to calculate NAV is to divide the net worth of the company by the total number of oooutstanding shares. Say, a company’s share capital is Rs. 100 crores (10 crores shares of Rs. 10 each) and its reserves and surplus is another Rs. 100 crores. Net worth of the company would be Rs. 200 crores (equity and reserves) and NAV would be Rs. 20 per share (Rs. 200 crores divided by 10 crores outstanding shares).
NAV can also be calculated by adding all the assets and subtracting all the outside liabilities from them. This will again boil down to net worth only. One can use any of the two methods to find out NAV.
One can compare the NAV with the going market price while taking investment decisions.
Discounted Cash Flows Method (DCF)
DCF is the most widely used technique to value a company. It takes into consideration the cash flows arising to the company and also the time value of money. That’s why, it is so popular. What actually happens in this is, the cash flows are calculated for a particular period of time (the time period is fixed taking into consideration various factors). These cash flows are discounted to the present at the cost of capital of the company. These discounted cash flows are then divided by the total number of outstanding shares to get the intrinsic worth per share.
Role of Earnings in Investment decisions
- revenue growth,
- sustainability of earnings or growth over time,
- increased market share,
- increased gross margins,
- price targets for the stock or
- any other reasons you have for making the investment.
For example, you might write, "I am buying XYZ Corp. because I think earnings will grow at a rate of 20% per year and that the price/earnings multiple will increase from its current level of 16 to between 22 and 25."
- Has the company bought back a large chunk of its stock?
- If so, earnings may have improved on a per-share basis, but may have stayed flat or even declined in real terms.
- Any one-time charge or gain will be stated in per-share amounts as a footnote. Just subtract it from the EPS if it is a gain, or add it back if it is a loss.
- Once you have the EPS number exclusive of one-time items, you can compare it to the EPS from the same quarter last year to see how much growth has occurred.
- Compare the growth figure of your company to others in the same industry.
- What does the growth rate in sales look like?
- How was it last quarter?
- Are gross margin percentages better or worse than they have been historically?
- Are expenses increasing faster than sales?
What is RISK? Equity investment is the most risky investment in all the financial markets.
Risk Reward Ragas
Whenever we talk about investments, there is always some risk associated with all of them. Risk is the most dreaded word in all the financial markets across the globe. Any person, who is operating in the financial markets, in whatever capacity, has to face risk. So the question in most minds is, what exactly this RISK is? What does it mean?
In general terms, risk means any deviation from expectations. In Financial parlance, risk means any deviation from the expected returns. More specifically, the probability that the returns from any asset will differ from the expected yields is the risk inherent in that asset. We all face risk in our lives in one way or the other. So lets have an understanding of the risk
Risk inherent in equity investments
Equity investment is the most risky investment in all the financial markets. So one needs to have an understanding of risks associated with equity investments. Broadly, there are two types of risks associated with equity investments, viz., systematic risk and unsystematic risk. Lets have an understanding of these two types of risks.
Systematic risk: or the market risk, as it is called, this is the variation in the return on any scrip due to market movements. For example, suppose the Government announces a corporate tax cut or rise across the board, it is going to effect all the stocks in the market in the same way. This is the systematic risk of scrip, which exists because of market movements.
There is nothing much one can do about systematic risk of a security because it arises due to some extraneous variables. But there still exists some techniques, which help to hedge against the systematic risk of a security.
A good measure of an asset’s systematic risk is its Beta. Beta is calculated by regressing the returns of a particular asset on market returns. It can be interpreted as, say the beta of a stock is 1.25, then whenever the market moves by 1%, the stock will move by 1.25%.
Unsystematic risk: is the variation in the return of a scrip due to that scrip specific factors or movements. For example, say the Government announces tax sops to companies in a particular sector, it is going to effect the prices of the stocks of companies which are operating in that sector and not all the stocks.
Measuring risk
We can measure risk in two ways – Ex post and Ex ante risk measurement. Ex post measurement is done after the happening of an event and Ex ante measurement is done before the happening of an event.
Ex post Risk
When risk is measured ex post, it is measured as Variance from the mean value. That is, it is the statistical measure of Variance associated with the returns on a particular asset. For example, if one wants to measure risk associated with a particular stock, he will take the returns generated on the stock over a period of time and then he will find out the variance in the return of that particular stock. That variance will be the risk of that stock.
Ex ante Risk
When it is measured ex ante, it is measured as the probability that the returns from an asset will deviate from the mean or the expected returns. For this, if the variable has a normal distribution, the Theory of Normal distribution can be easily applied to find out the probability of this deviation. Otherwise subjective estimates of the probability have to be made.
For example, say the changes in a stock price have normal distribution. One can take the mean return based on the past return of the stock. Then, using the Standard Normal probability distribution, he can find out the probability of the return on that stock falling below that mean or expected return.
If the stock price is not normally distributed, then he will have to make subjective estimates of probabilities of getting a particular return. Using that, he can find out what is the expected return on that stock. Then the risk on that stock is the statistical measure of variance in return of that stock from the expected return.
Hedging risks associated with equity investments
Risk Hedging encapsulates all the activities required to ensure that the exposure, one is having, on account of the risk, doesn’t transform into loss. That is, the exposure is only a notional loss, which might transform into actual loss on happening of a particular event, but if necessary steps are taken to control, manage and diversify away the risk, this exposure can be controlled. All the activities undertaken to do so collectively comes under the purview of risk hedging.
In the following section, we present some of the commonly used techniques for managing risks:
Use of derivatives: Derivatives are most commonly used to hedge against the market risk. The use of the type of derivative instrument depends upon the expectations. An example will make the point clear. Say, you have 100 Reliance shares, the market price of which is presently RS. 300. Now you expect that the price of Reliance might go down in the future due to some reason. To hedge yourself against this risk, you can buy a Put option on Reliance’s stock and lock in a price. If the price actually falls, you can sell those shares at the price you contracted through Put option. If you expect prices to rise and you want to buy shares in the future, you can buy a Call option on Reliance’s stock.
To learn more about derivative basics, click here (a link to our derivative channel).
As of now, the use of derivatives on individual securities is not allowed in India. Sometime back, the use of any derivative instrument was not allowed in India. But now the SEBI has allowed the use of Index Futures on BSE and NSE. Soon, these Futures instruments will start trading on other exchanges also. And in due of course of time, the entire range of derivative instruments will be allowed in India.
Making a portfolio: To guard yourself against market risk, you can also make a portfolio of stocks whose returns are negatively correlated with each other. If you make a portfolio of two stocks whose correlation co-efficient is –1 (minus 1), then your market risk is minimized.
http://www.karvy.com/buysell/risk.htm
Whenever we talk about investments, there is always some risk associated with all of them. Risk is the most dreaded word in all the financial markets across the globe. Any person, who is operating in the financial markets, in whatever capacity, has to face risk. So the question in most minds is, what exactly this RISK is? What does it mean?
In general terms, risk means any deviation from expectations. In Financial parlance, risk means any deviation from the expected returns. More specifically, the probability that the returns from any asset will differ from the expected yields is the risk inherent in that asset. We all face risk in our lives in one way or the other. So lets have an understanding of the risk
Risk inherent in equity investments
Equity investment is the most risky investment in all the financial markets. So one needs to have an understanding of risks associated with equity investments. Broadly, there are two types of risks associated with equity investments, viz., systematic risk and unsystematic risk. Lets have an understanding of these two types of risks.
Systematic risk: or the market risk, as it is called, this is the variation in the return on any scrip due to market movements. For example, suppose the Government announces a corporate tax cut or rise across the board, it is going to effect all the stocks in the market in the same way. This is the systematic risk of scrip, which exists because of market movements.
There is nothing much one can do about systematic risk of a security because it arises due to some extraneous variables. But there still exists some techniques, which help to hedge against the systematic risk of a security.
A good measure of an asset’s systematic risk is its Beta. Beta is calculated by regressing the returns of a particular asset on market returns. It can be interpreted as, say the beta of a stock is 1.25, then whenever the market moves by 1%, the stock will move by 1.25%.
Unsystematic risk: is the variation in the return of a scrip due to that scrip specific factors or movements. For example, say the Government announces tax sops to companies in a particular sector, it is going to effect the prices of the stocks of companies which are operating in that sector and not all the stocks.
Measuring risk
We can measure risk in two ways – Ex post and Ex ante risk measurement. Ex post measurement is done after the happening of an event and Ex ante measurement is done before the happening of an event.
Ex post Risk
When risk is measured ex post, it is measured as Variance from the mean value. That is, it is the statistical measure of Variance associated with the returns on a particular asset. For example, if one wants to measure risk associated with a particular stock, he will take the returns generated on the stock over a period of time and then he will find out the variance in the return of that particular stock. That variance will be the risk of that stock.
Ex ante Risk
When it is measured ex ante, it is measured as the probability that the returns from an asset will deviate from the mean or the expected returns. For this, if the variable has a normal distribution, the Theory of Normal distribution can be easily applied to find out the probability of this deviation. Otherwise subjective estimates of the probability have to be made.
For example, say the changes in a stock price have normal distribution. One can take the mean return based on the past return of the stock. Then, using the Standard Normal probability distribution, he can find out the probability of the return on that stock falling below that mean or expected return.
If the stock price is not normally distributed, then he will have to make subjective estimates of probabilities of getting a particular return. Using that, he can find out what is the expected return on that stock. Then the risk on that stock is the statistical measure of variance in return of that stock from the expected return.
Hedging risks associated with equity investments
Risk Hedging encapsulates all the activities required to ensure that the exposure, one is having, on account of the risk, doesn’t transform into loss. That is, the exposure is only a notional loss, which might transform into actual loss on happening of a particular event, but if necessary steps are taken to control, manage and diversify away the risk, this exposure can be controlled. All the activities undertaken to do so collectively comes under the purview of risk hedging.
In the following section, we present some of the commonly used techniques for managing risks:
Use of derivatives: Derivatives are most commonly used to hedge against the market risk. The use of the type of derivative instrument depends upon the expectations. An example will make the point clear. Say, you have 100 Reliance shares, the market price of which is presently RS. 300. Now you expect that the price of Reliance might go down in the future due to some reason. To hedge yourself against this risk, you can buy a Put option on Reliance’s stock and lock in a price. If the price actually falls, you can sell those shares at the price you contracted through Put option. If you expect prices to rise and you want to buy shares in the future, you can buy a Call option on Reliance’s stock.
To learn more about derivative basics, click here (a link to our derivative channel).
As of now, the use of derivatives on individual securities is not allowed in India. Sometime back, the use of any derivative instrument was not allowed in India. But now the SEBI has allowed the use of Index Futures on BSE and NSE. Soon, these Futures instruments will start trading on other exchanges also. And in due of course of time, the entire range of derivative instruments will be allowed in India.
Making a portfolio: To guard yourself against market risk, you can also make a portfolio of stocks whose returns are negatively correlated with each other. If you make a portfolio of two stocks whose correlation co-efficient is –1 (minus 1), then your market risk is minimized.
http://www.karvy.com/buysell/risk.htm
Basics of Company Valuation
Basics of Company Valuation
Andrew J. Sherman, Partner, Dickstein Shapiro Morin and Oshinsky LLP
Formal valuation of the seller's business is a vital component of the buyer's analysis when discussing a proposed acquisition. The valuation of a business in the context of an acquisition, as opposed to estate planning or other purposes, often involves consideration of "investment" or "strategic" value beyond a street analysis of fair market value. Valuation may be done by the seller prior to entertaining prospective buyers, by the buyer who identifies a specific target or by both parties during negotiations to resolve a dispute over price.
However, company valuation is not an exact science, nor will valuation issues typically drive the terms and pricing of the transaction. There are numerous acceptable valuation methods and, in most situations, each will yield a different result. In fact, the formal mathematical valuation should only play one part in the overall pricing of the deal and in determining the transaction's true value to the parties. While all methods should, in theory, yield the same result, they rarely do, because of factors including, but not limited to, market conditions, the industry in which the target company operates and the type and nature of the business.
All three main methods of valuation are open to debate and differences of opinion. The methods are useful in that they provide starting points and supply a range of reasonable values backed by various valid manners of justification. Even so, the value or price of a company is dependent on the particular time of the valuation and on the true motivations and goals of the key players involved in the transaction. Fair market value is commonly defined as the amount at which property would change hands between a willing seller and a willing buyer when neither is under compulsion and both have reasonable knowledge of the relevant facts.
Challenges for a Smaller Company
For deals in the $1-million to $250-million range, these smaller, closely-held businesses will be more difficult to evaluate, because of certain "information risks" that can also result in lower valuations. These include:
•Lack of externally generated information, including analyst coverage, resulting in a lack of forecasts.
•Lack of adequate press coverage and other avenues to disseminate company- generated information.
•Lack of internal controls.
•Possible lack of internal reporting.
Smaller companies may also be more difficult to evaluate for firm-specific reasons, such as:
•Inability to obtain any financing or reasonably priced financing.
•Lack of product, industry, and geographic diversification.
•Inability to expand into new markets.
•Lack of management expertise.
•Higher sensitivity to macro- and microeconomic movements.
•Lack of dividend history.
•More sensitivity to business risks, supply squeezes, and demand lulls.
•Inability to control or influence regulatory and union activity.
•Lack of economies of scale or cost disadvantages.
•Lack of access to distribution channels.
•Lack of relationships with suppliers and customers.
•Lack of product differentiation or brand name recognition.
•Lack of deep pockets necessary for staying power.
Using a Professional Business Appraiser
To arrive at a valuation for the seller's company, self-evaluation or studying comparable companies and transactions may be used, but the means most widely accepted by both buyers and sellers considering a merger or acquisition is the use of a professional business appraiser. A professional appraiser can ensure that the starting point for negotiations is a valid one and that there is a strong and clear justification for the valuation. An appraiser is trained to look at a company and its assets, management, employees, financials, future projections, etc. as objectively as possible and turn this assessment into a range of values that are valid for the selling price of the company.
The target company will have to cooperate with the appraiser in order for the appraiser to arrive at a reasonable range of prices. Managers often feel threatened by the appraiser's detailed scrutiny of every aspect of the company's operations and management, but this access is important to the appraiser's ability to arrive at a fair valuation. An appraiser will probably request access to various offices and/or work sites run by the company, as well as approval to interview key personnel from both management and employee ranks. And, of course, the appraiser will ask to see complete financial records from recent years.
It is essential to define clearly the terms under which a professional business appraiser will be working when he or she is initially hired, in order to avoid problems down the road. First, the expected time frame for completion of the appraisal must be set forth in advance and must be reasonable. A proper appraisal takes a minimum of several weeks to complete. Also, be sure to clearly explain whether the finished product should be delivered as an oral or a written report.
Be careful to lay out exactly the amount of the appraiser's fee and when that fee will be paid. Beware of fee structures that could give rise to a conflict of interest. For example, a fee that is a percentage of the end value stated for the company, or payment only upon completion of the merger or acquisition transaction, gives the appraiser an apparent incentive to alter the value of the company to fit his or her best interests, and such appraisals may lack credibility as a negotiating tool.
Determining Strategic Value
In the context of a proposed acquisition, a veteran appraiser will create a strategic model of a proforma, showing what the seller's business would look like under the umbrella of the prospective buyer's company. The first step is to normalize current operating results to establish "net free cash flow." Next, the appraiser examines several "what-if" scenarios to determine how specific line items would change under various circumstances. This exercise allows the appraiser to identify a range of strategic values based on the projected earnings stream of the seller's company under its proposed new ownership. The higher this earnings stream, the higher the purchase price.
To arrive at this "strategic value," the appraiser obtains a great deal of financial data and general information on many aspects of the seller's business, such as the quality of management or the company's reputation in the marketplace. The appraiser must be alert throughout this process in order to capture bits of information that will be useful in the final determination of the company's strategic value. In addition, other elements are considered that may not be apparent without further probing. The appraiser attempts to assess how the value of the target company will be affected by any changes to the operations or foundation of the company as a result of the proposed transaction, such as a loss of key customers or key managers.
The professional business appraiser should also examine the seller's intangible assets when determining strategic value. The inventory of intangible assets includes such items as customer lists, intellectual property, patents, license and distributorship agreements, regulatory approvals, leasehold interests and employment contracts. Since certain intangibles may not be readily apparent, the more specifics the seller can supply, the more likely it is that they will enhance the valuation.
Finally, the appraiser conducts an analysis of the seller's financial procedures and accounting practices and evaluates the appropriateness and accuracy of these procedures. The appraiser also looks at the expected effect that credit ratings have on the company's value. The company's reputation in the business community, while difficult to define precisely, will affect its future value as well. And the appraiser may learn much about a company's potential from the management's own future plans and projections.
http://www.entrepreneurship.org/basics-of-company-valuation.html
Andrew J. Sherman, Partner, Dickstein Shapiro Morin and Oshinsky LLP
Formal valuation of the seller's business is a vital component of the buyer's analysis when discussing a proposed acquisition. The valuation of a business in the context of an acquisition, as opposed to estate planning or other purposes, often involves consideration of "investment" or "strategic" value beyond a street analysis of fair market value. Valuation may be done by the seller prior to entertaining prospective buyers, by the buyer who identifies a specific target or by both parties during negotiations to resolve a dispute over price.
However, company valuation is not an exact science, nor will valuation issues typically drive the terms and pricing of the transaction. There are numerous acceptable valuation methods and, in most situations, each will yield a different result. In fact, the formal mathematical valuation should only play one part in the overall pricing of the deal and in determining the transaction's true value to the parties. While all methods should, in theory, yield the same result, they rarely do, because of factors including, but not limited to, market conditions, the industry in which the target company operates and the type and nature of the business.
All three main methods of valuation are open to debate and differences of opinion. The methods are useful in that they provide starting points and supply a range of reasonable values backed by various valid manners of justification. Even so, the value or price of a company is dependent on the particular time of the valuation and on the true motivations and goals of the key players involved in the transaction. Fair market value is commonly defined as the amount at which property would change hands between a willing seller and a willing buyer when neither is under compulsion and both have reasonable knowledge of the relevant facts.
Challenges for a Smaller Company
For deals in the $1-million to $250-million range, these smaller, closely-held businesses will be more difficult to evaluate, because of certain "information risks" that can also result in lower valuations. These include:
•Lack of externally generated information, including analyst coverage, resulting in a lack of forecasts.
•Lack of adequate press coverage and other avenues to disseminate company- generated information.
•Lack of internal controls.
•Possible lack of internal reporting.
Smaller companies may also be more difficult to evaluate for firm-specific reasons, such as:
•Inability to obtain any financing or reasonably priced financing.
•Lack of product, industry, and geographic diversification.
•Inability to expand into new markets.
•Lack of management expertise.
•Higher sensitivity to macro- and microeconomic movements.
•Lack of dividend history.
•More sensitivity to business risks, supply squeezes, and demand lulls.
•Inability to control or influence regulatory and union activity.
•Lack of economies of scale or cost disadvantages.
•Lack of access to distribution channels.
•Lack of relationships with suppliers and customers.
•Lack of product differentiation or brand name recognition.
•Lack of deep pockets necessary for staying power.
Using a Professional Business Appraiser
To arrive at a valuation for the seller's company, self-evaluation or studying comparable companies and transactions may be used, but the means most widely accepted by both buyers and sellers considering a merger or acquisition is the use of a professional business appraiser. A professional appraiser can ensure that the starting point for negotiations is a valid one and that there is a strong and clear justification for the valuation. An appraiser is trained to look at a company and its assets, management, employees, financials, future projections, etc. as objectively as possible and turn this assessment into a range of values that are valid for the selling price of the company.
The target company will have to cooperate with the appraiser in order for the appraiser to arrive at a reasonable range of prices. Managers often feel threatened by the appraiser's detailed scrutiny of every aspect of the company's operations and management, but this access is important to the appraiser's ability to arrive at a fair valuation. An appraiser will probably request access to various offices and/or work sites run by the company, as well as approval to interview key personnel from both management and employee ranks. And, of course, the appraiser will ask to see complete financial records from recent years.
It is essential to define clearly the terms under which a professional business appraiser will be working when he or she is initially hired, in order to avoid problems down the road. First, the expected time frame for completion of the appraisal must be set forth in advance and must be reasonable. A proper appraisal takes a minimum of several weeks to complete. Also, be sure to clearly explain whether the finished product should be delivered as an oral or a written report.
Be careful to lay out exactly the amount of the appraiser's fee and when that fee will be paid. Beware of fee structures that could give rise to a conflict of interest. For example, a fee that is a percentage of the end value stated for the company, or payment only upon completion of the merger or acquisition transaction, gives the appraiser an apparent incentive to alter the value of the company to fit his or her best interests, and such appraisals may lack credibility as a negotiating tool.
Determining Strategic Value
In the context of a proposed acquisition, a veteran appraiser will create a strategic model of a proforma, showing what the seller's business would look like under the umbrella of the prospective buyer's company. The first step is to normalize current operating results to establish "net free cash flow." Next, the appraiser examines several "what-if" scenarios to determine how specific line items would change under various circumstances. This exercise allows the appraiser to identify a range of strategic values based on the projected earnings stream of the seller's company under its proposed new ownership. The higher this earnings stream, the higher the purchase price.
To arrive at this "strategic value," the appraiser obtains a great deal of financial data and general information on many aspects of the seller's business, such as the quality of management or the company's reputation in the marketplace. The appraiser must be alert throughout this process in order to capture bits of information that will be useful in the final determination of the company's strategic value. In addition, other elements are considered that may not be apparent without further probing. The appraiser attempts to assess how the value of the target company will be affected by any changes to the operations or foundation of the company as a result of the proposed transaction, such as a loss of key customers or key managers.
The professional business appraiser should also examine the seller's intangible assets when determining strategic value. The inventory of intangible assets includes such items as customer lists, intellectual property, patents, license and distributorship agreements, regulatory approvals, leasehold interests and employment contracts. Since certain intangibles may not be readily apparent, the more specifics the seller can supply, the more likely it is that they will enhance the valuation.
Finally, the appraiser conducts an analysis of the seller's financial procedures and accounting practices and evaluates the appropriateness and accuracy of these procedures. The appraiser also looks at the expected effect that credit ratings have on the company's value. The company's reputation in the business community, while difficult to define precisely, will affect its future value as well. And the appraiser may learn much about a company's potential from the management's own future plans and projections.
http://www.entrepreneurship.org/basics-of-company-valuation.html
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