Rationale of Value Investing:
1. You will have a specific value framework to help you make investment decisions.
2. You will know how to find the balance between price and value, and how to "buy right."
3. You will know how to identify events that move stock prices.
4. You will be able to generate your own value investment targets and build your own portfolio.
Goal of the Value Investor:
Good Business + Excellent Price = Adequate Return over Time
Emotional Discipline:
With an established framework, value investors are more likely to avoid getting caught up with the moods of the market or their own emotional feelings of the day.
Charateristics of Value Investors:
1. They exude emotional discipline.
2. They possess a robust framework for making investment decisions.
3. They apply original research and independent thinking.
The Seven Fundamental Beliefs:
Belief No. 1: The world is not coming to an end, despite how the stock market is reacting.
Belief No. 2: Investors will always be driven by fear and greed, and the overall market and stocks will react accordingly. This volatility is simply the cost of doing business.
Belief No. 3: Inflation is the only true enemy. Trying to predict economic variables and the direction of the market or the economy is a waste of time - focus on businesses and their values, and remember Belief #1.
Belief No. 4: Good ideas are hard to find, but there are always good ideas out there, even in bear markets.
Belief No. 5: The primary purpose of a publicly traded company is to convert all of the company's available resources into shareholder value. As shareholders, your job is to make sure that this happens.
Belief No. 6: Ninety percent of successful investing is buying right. Selling at the optimal price is the hard part. As a result, value investors tend to buy early and sell early. [Buying early allows the investor to use dollar cost averaging. Dollar cost averaging is buying more shares of a particular company as the share price trades lower in the market place.]
Belief No. 7: Volatility is not risk; it is opportunity. Real risk is an and permanent change in the intrinsic value of the company.
Five key questions in considering investment opportunities:
1. Is this a good business run by smart people?
This may include items such as quality of earnings, product lines, market sizes, management teams, and the sustainability of competitive positioning within the industry.
2. What is this company worth?
Value investors perform fair value assessments that allow them to establish a range of prices that would determine the fair value of the company, based on measures such as normalized free cash flow, break-up , takeout, and/or asset values. Exit valuation assessment provides a rational "fair value" target price, and indicates the upside opportunity from the current stock price.
3. How attractive is the price for this company, and what should I pay for it?
Price assessment allows the individual to understand fully the price at which the stock market is currently valuing the company. In this analysis, the investor takes several factors into account by essentially answering the question. Why is the company afforded its current low valuation? For example, a company with an attractive valuation at first glance may not prove to be so appealing after a proper assessment of its accounting strategy or its competitive position relative to its peers.
4. How realistic is the most effective catalyst?
Catalyst identification and effectiveness bridges the gap between the current asking price and what value investors think the company is worth based on their exit valution assessment. The key here lies in making sure that the catalyst identified to "unlock" value in the company is very likely to occur. Potential effective catalysts may include the breakup of the company, a divestiture, new management, or an ongoing internal catalyst, such as a company's culture.
5. What is my margin of safety at my purchase price?
Buying shares with a margin of safety is essentially owning shares cheap enough that the price paid is heavily supported by the underlying economics of the business, asset values, and cash on the balance sheet. If a company's stock trades below this "margin of safety" price level for a length of time, it would be reasonable to believe that the company is more likely to be sold to a strategic or financial buyer, broken up, or liquidated to realize its true intrinsic value - thus making such shares safer to own.
Example Valuation Approach:
1. Sum of parts valuation (using three different multiples EV/EBITDA, EV/FCF, and PE).
2. Historical valuation (using the same multiples to see how the market valued the company historically).
3. Transaction deal basis (comparison with similar deals using EV to Cash Flow and EV to Revenue).
Take an average to give an idea of Fair Value. The need is then to establish a Purchase Price at a discount to Fair Value and with a margin of safety. For example, 5.5 times Enterprise Value to pre-tax and interest cash flow could be used.
http://www.docstoc.com/docs/7984050/Investment-Strategies (Pg 54 to Pg 56)
Thursday 10 December 2009
****Buffett Fundamental Investing: How to pick stocks like Warren Buffett
Buffett Fundamental Investing
How to Pick Stock Like Warren Buffett by Timothy Vick
1. Intrinsic Value = sum total of future expected Earnings with each year's Earnings discounted by the Time Value of Money.
2. A company's Growth record is the most reliable predictor of its future course. It is best to average past Earnings to get a realistic figure. Each year's Earnings need to be discounted by the appropriate discount rate.
3. Is the stock more attractive than a bond? Divide the 12 months EPS by the current rate of long-term Government Bonds e.g. EPS of $2.50 / 6% or 0.06 = $40. If the stock trades for less than $40, it is better value than a bond. If the share's earnings are expected to grow annually, it will beat a bond.
4. Identify the expected Price Range, Projected future EPS 10 years out, based on average of past EPS Growth. Multiply by the High and Low PE Ratios to find the expected Price Range. Add in the expected Dividends for the period. Compute an annualised Rate of Return based on the increase in the Share Price. Buffett's hurdle is 15%.
5. Book Value. Ultimately, Price shoud approximate growth in Book Value and in Intrinsic Value. Watch out the increases in Book Value which are generated artificially
6. Return on Equity. ROE = Net Income (end-of-year Shareholders' Equity + start-of-year Shareholder's Equity/2). Good returns on ROE should benefit the Share Price. High ROE - EPS Growth - Increase in Shareholder's Equity - Intrinsic Value - Share Price. A high ROE is difficult to maintain, as the company gets bigger. Look for high ROE with little or no debt. Drug and Consumer product companies can carry over 50% Debt and still have high ROEs. Share buy-backs can be used to manipulate higher ROEs. ROE should be 15%+.
7. Rate of Returns. 15% Rule. Collect and calculate figures on the following:
Tabulation in Table Format
Price:
EPS:
PE:
Growth Rate:
Average PE:
Dividend Payout:
Year ---- EPS
20-
20-
20-
20-
20-
20-
20-
20-
20-
20-
----------------
Total
Price needed in 10 years to get 15%: $____
Expected 10-year Price (20--EPS* Av. PE): $____
Plus expected Dividends: $____
Total Return: $____
Expected 10-year Rate of Return: ____%
-----
Highest Price you can pay to get 15% return: $ _____
------
Stock Evaluation. Can a company earn its present Market Cap. in terms of future Profits? Does the company have a consistent record of accomplishment?
Shares are Bonds with less predictable Coupons. Shares must beat inflation, Government Bond Yields and be able to rise over time. Shares should be bought in preference to Bonds when the current Earnings Yield (Current Earnings/Price) is at or above the level of long-term Bonds.
When To Sell:
Takeover Arbitrage
General Criteria:
Buffett-Style Value Criteria and Filter.
1. Earnings yield should be at least twice the AAA bond yield (which is about 5.9%)
2. PE should be less than 40% of the share's highest PER over the previous five years.
3. Dividend yield should be at least two thirds of the AAA bond yield.
4. Stock price should be no more than two thirds of company's tangible book value per share.
5. Company should be selling in the market for no more than two thirds of its net current assets.
To this, add Margin of Safety criteria:
1. Company should owe no more than it is worth: total debt should not exceed book value.
2. Current assets should be at least twice current liabilities - in other words, the current ratio should exceed 2.
3. Total debt should be less than twice net current assets.
4. Earnings growth should be at least 7% a year compound over the past decade.
5. As an indication of stability of earnings, there should have been no more than two annual earnings declines of 5% or more during the past decade.
Demanding a share price no more than two-thirds tangible assets is asking too much of today's market. The basic search, therefore, used the following sieves:
1. PE less than 8.5. This is the implied multiple from the demand that the earnings yield should be more than twice 5.9%. The inverse of an 11.8% earnings yield is a price-earnings multiple of 8.5.
2. A dividend yield of at least 4% - two thirds of the 5.9% AAA bond yield.
3. A Price to Tangible Assets Ratio of less than 0.8 - price less than four-fifths tangible assets.
4. Gross Gearing of less than 100% - the company does not owe more than it is worth.
5. Current Ratio of at least two - in other words current assets are at least twice current liabilities.
http://www.docstoc.com/docs/7984050/Investment-Strategies (Page 91)
How to Pick Stock Like Warren Buffett by Timothy Vick
1. Intrinsic Value = sum total of future expected Earnings with each year's Earnings discounted by the Time Value of Money.
2. A company's Growth record is the most reliable predictor of its future course. It is best to average past Earnings to get a realistic figure. Each year's Earnings need to be discounted by the appropriate discount rate.
3. Is the stock more attractive than a bond? Divide the 12 months EPS by the current rate of long-term Government Bonds e.g. EPS of $2.50 / 6% or 0.06 = $40. If the stock trades for less than $40, it is better value than a bond. If the share's earnings are expected to grow annually, it will beat a bond.
4. Identify the expected Price Range, Projected future EPS 10 years out, based on average of past EPS Growth. Multiply by the High and Low PE Ratios to find the expected Price Range. Add in the expected Dividends for the period. Compute an annualised Rate of Return based on the increase in the Share Price. Buffett's hurdle is 15%.
5. Book Value. Ultimately, Price shoud approximate growth in Book Value and in Intrinsic Value. Watch out the increases in Book Value which are generated artificially
- a) issuing more shares
- b) acquisitions
- c) leaving cash in the bank to earn interest, in which case ROE will slowly fall.
6. Return on Equity. ROE = Net Income (end-of-year Shareholders' Equity + start-of-year Shareholder's Equity/2). Good returns on ROE should benefit the Share Price. High ROE - EPS Growth - Increase in Shareholder's Equity - Intrinsic Value - Share Price. A high ROE is difficult to maintain, as the company gets bigger. Look for high ROE with little or no debt. Drug and Consumer product companies can carry over 50% Debt and still have high ROEs. Share buy-backs can be used to manipulate higher ROEs. ROE should be 15%+.
7. Rate of Returns. 15% Rule. Collect and calculate figures on the following:
- current EPS
- estimate future Growth Rate of use Consensus Forecasts
- calculate historic average PE Ratio
- calculate Dividend Payout Ratio
Tabulation in Table Format
Price:
EPS:
PE:
Growth Rate:
Average PE:
Dividend Payout:
Year ---- EPS
20-
20-
20-
20-
20-
20-
20-
20-
20-
20-
----------------
Total
Price needed in 10 years to get 15%: $____
Expected 10-year Price (20--EPS* Av. PE): $____
Plus expected Dividends: $____
Total Return: $____
Expected 10-year Rate of Return: ____%
-----
Highest Price you can pay to get 15% return: $ _____
------
Stock Evaluation. Can a company earn its present Market Cap. in terms of future Profits? Does the company have a consistent record of accomplishment?
Shares are Bonds with less predictable Coupons. Shares must beat inflation, Government Bond Yields and be able to rise over time. Shares should be bought in preference to Bonds when the current Earnings Yield (Current Earnings/Price) is at or above the level of long-term Bonds.
When To Sell:
- Bond Yields are rising and about to overtake Share Earnings Yields.
- Share Prices are rising at a greater rate than the economy is expanding.
- Excessive PE multiples, even allowing for productivity and low interest rates.
- Economy cannot get any stronger.
Takeover Arbitrage
- Buy at a Price below the target takeover Price.
- Only invest in deals already announced.
- Calculate Profits in Advance. Annualised return of 20-30% needed.
- Ensure the deal is almost certain. A widening spread may mean the worst.
General Criteria:
- Consistent Earnings Growth
- High Cash Flow and Low level of Spending
- Little need of long-term Debt
- High ROE 15%+
- High ROA (Return on Total Inventory plus Plant)
- Low Price relative to Valuation.
Buffett-Style Value Criteria and Filter.
1. Earnings yield should be at least twice the AAA bond yield (which is about 5.9%)
2. PE should be less than 40% of the share's highest PER over the previous five years.
3. Dividend yield should be at least two thirds of the AAA bond yield.
4. Stock price should be no more than two thirds of company's tangible book value per share.
5. Company should be selling in the market for no more than two thirds of its net current assets.
To this, add Margin of Safety criteria:
1. Company should owe no more than it is worth: total debt should not exceed book value.
2. Current assets should be at least twice current liabilities - in other words, the current ratio should exceed 2.
3. Total debt should be less than twice net current assets.
4. Earnings growth should be at least 7% a year compound over the past decade.
5. As an indication of stability of earnings, there should have been no more than two annual earnings declines of 5% or more during the past decade.
Demanding a share price no more than two-thirds tangible assets is asking too much of today's market. The basic search, therefore, used the following sieves:
1. PE less than 8.5. This is the implied multiple from the demand that the earnings yield should be more than twice 5.9%. The inverse of an 11.8% earnings yield is a price-earnings multiple of 8.5.
2. A dividend yield of at least 4% - two thirds of the 5.9% AAA bond yield.
3. A Price to Tangible Assets Ratio of less than 0.8 - price less than four-fifths tangible assets.
4. Gross Gearing of less than 100% - the company does not owe more than it is worth.
5. Current Ratio of at least two - in other words current assets are at least twice current liabilities.
http://www.docstoc.com/docs/7984050/Investment-Strategies (Page 91)
Wednesday 9 December 2009
Investing Strategy - Growth Investing
Growth Investing
Look for three characteristics of Growth - superior brand, good management and superior technology.
Buying:
Entry
Exit:
http://www.docstoc.com/docs/7984050/Investment-Strategies (Page 96)
Look for three characteristics of Growth - superior brand, good management and superior technology.
Buying:
- A PEG less than 0.75
- Market Capitalization greater than GBP 20m
- PE less than 20
- High projected Earnings Growth 1 - 5 years.
- Highest 1, 3, and 5 year historical Earnings Growth
- High continuous EPS Growth, historical and current.
- Positive Earning Surprises.
- High Revenue Growth.
- Positive Cash Flow. Cash Flow per share should be greater than Capital Expenditure per share. Cash Flow per share should exceed EPS. Low P/CF ratio.
- Positive Relative Strength over the last 1, 3, 6, and 12 months.
- Net Gearing less than 50%. Interest Cover, Quick Ratio, and Current Ratio need to be healthy.
- Look for high Margins relative to the sector and a high ROCE.
- Pay attention to Directors' Dealings
- Check recent Brokers' Estimates
Entry
- TA signals
Exit:
- If the PEG has doubled.
- Trailing Stop/Loss of 10%
http://www.docstoc.com/docs/7984050/Investment-Strategies (Page 96)
Value Buying and Selling
Value Buying and Selling
Invest in good companies on the dip.
1. Do not down average.
2. Buy when market is pessimistic.
3. Sell when:
Source:
The Motley Fool www.fool.co.uk/
Page 11: http://www.docstoc.com/docs/7984050/Investment-Strategies
Invest in good companies on the dip.
1. Do not down average.
2. Buy when market is pessimistic.
3. Sell when:
- Fundamentals change for the worse
- Grossly over-valued
- Better investment opportunities exists
- Stock falls 10% below purchase price or when 50 day Moving Average falls below the Price line
- PBV is usually the first to break. That is, it will go over 1. It breaks first in most cases because the discount to 1 is usually fairly modest to start with. Shares bought on a PBV of 0.9 need only rise by 11% for the discount to be erased. But if the PE on purchase was 8 and the Yield 5%, when PBV hits 1, the shares would only be at a still attractive 8.9 and 4.5% respectively. Do not sell just because PBV < 1 ceases to exist.
- Sell on a strong rising PE and falling Yield, unless there is an indication that these would come back down to value levels by the release of very good figures. Thus if historical PE had risen to 16 and Yield to 2.5% and an announcement showed doubled EPS and Dividend, that immediately puts the shares back on to a PE of 8 and yield of 5% on a historical basis.
- If you wait for the announcement, review the net Cash, PBV and especially, EPS forecasts. If these still make sense stay in because the share had reinstated deep value status. This situation is quite rare.
- In most cases, announcements merely confirm that the share has performed in line with expectations, rather than greatly exceeded them, and has lost super value status. Therefore, after a good rise, where most of the deep value has gone, sell shortly before announcements, rather than after, because shares frequently fall back following the figures, unless those figures are much better than anticipated. That does not happen often.
Source:
The Motley Fool www.fool.co.uk/
Page 11: http://www.docstoc.com/docs/7984050/Investment-Strategies
Market Timing: You need to be right 70%+ of the time to break even.
Market Timing:
You need to be right 70%+ of the time to break even. Market timing skills are vastly overstated. Various indicators may tell you that the market is over-valued but it does not tell you when the correction will occur.
You can always find under-valued stocks in an over-priced market. PEs tend to revert to 16 but lower interest rates allow for much higher PEs. There is a positive relationship between GDP growth and stock returns in any single year but it does not predict returns for the following year.
Increases in Interest rates leads to higher Cost of Equity and lower PEs. Greater willingness to take risk leads to a higher Risk Premium for equity and higher PEs. An increase in expected Earnings Growth leads to a higher Market PE.
You need to be right 70%+ of the time to break even. Market timing skills are vastly overstated. Various indicators may tell you that the market is over-valued but it does not tell you when the correction will occur.
You can always find under-valued stocks in an over-priced market. PEs tend to revert to 16 but lower interest rates allow for much higher PEs. There is a positive relationship between GDP growth and stock returns in any single year but it does not predict returns for the following year.
Increases in Interest rates leads to higher Cost of Equity and lower PEs. Greater willingness to take risk leads to a higher Risk Premium for equity and higher PEs. An increase in expected Earnings Growth leads to a higher Market PE.
- If markets are over-valued, you could switch from Growth to Value.
- If a market increase based on real economic growth is expected, then you may switch into cyclicals.
- If interest rates go up causing the market to drop, switch out of financials into consumer products.
- N.B. The market will bottom out and peak before the economy e.g. invest in cyclicals when the economy enters a recession then shift into industrials and energy as the economy improves.
- Contrarians may invest in sectors that delivered the worst performance in previous periods.
'Buy on the rumour. Sell on the News."
'Buy on the rumour. Sell on the News."
This means that most of the benefit comes in the run-up with only a small advance after the announcement.
Markets are more efficeint about assessing good news; an investor needs to move quickly if he is to benefit.
Best if you can forecast the likely firms based on historical earnings and trading volume.
This means that most of the benefit comes in the run-up with only a small advance after the announcement.
Markets are more efficeint about assessing good news; an investor needs to move quickly if he is to benefit.
Best if you can forecast the likely firms based on historical earnings and trading volume.
Low PE stocks may have high-risk earnings or low growth.
Low PE stocks may have
Assess growth and eliminate
- high-risk earnings or
- low growth.
You could modify earnings e.g.
- P/Normalised Earnings
- P/Adjusted Earnings, or
- P/Cash Earnings [=P/Cash Earnings + Depreciation + Amortisation]
- Beta or
- Debt to Equity Ratio.
- declining Earnings or
- Earnings Growth lower than the sector.
****Investment Philosophy and Strategies Notes
Investment Philosophy and Strategies
http://www.docstoc.com/docs/7984050/Investment-Strategies
Portfolio Management Theory And Technical Analysis
Lecture Notes
http://samvak.tripod.com/portfolio.html
http://www.docstoc.com/docs/7984050/Investment-Strategies
Portfolio Management Theory And Technical Analysis
Lecture Notes
http://samvak.tripod.com/portfolio.html
Monday 7 December 2009
Large growth stocks have only seen 9.9% annualized rate of return as compared to 11.5% for the large value stocks.
Growth Stocks
06.12.2009 | Author: Ahmad Hassam | Posted in real estate
When you start looking for good stocks, you often come across these terms like large cap, mid cap, small cap, growth and value. Let’s discuss these terms for a moment. Capitalization or cap refers to the combined value of all the share of a company’s stocks. The division between large cap, mid cap and small cap are often blurry and not sharp.
However the following divisions are generally accepted: Large caps are companies with over $5 Billion in capitalization. Mid caps are companies with $1 to $5 Billion in capitalization and small caps are companies with $250 million to $1 Billion in capitalization. Anything below $250 million can be considered as micro cap. Now the most important term that you come across is growth stocks and value stocks. How do you determine this is a growth stock or a value stock? Perhaps the most important ratio is the Price to Earnings Ratio (P/E).
Perhaps the most important ratio is the Price to Earnings Ratio (P/E). Now the most important term that you come across is growth stocks and value stocks. How do you determine this is a growth stock or a value stock? Suppose, company ABC stock is presently selling for $50. Now suppose that last year company ABC earned $5 for every share of the stock outstanding. This means stock ABC P/E ratio is 50/5=10. So the higher the P/E ratio, the more investors are willing to pay for the stock. What is the P/E ratio? The P/E ratio divides the price of the stock by the earnings per share.
Let’s make this clear with an example. Do you know how to read the balance sheet of a company? One of the most important things in doing research on a stock is the balance sheet of the company. Suppose, company ABC stock is presently selling for $50. Now suppose that last year company ABC earned $5 for every share of the stock outstanding. This means stock ABC P/E ratio is 50/5=10. So the higher the P/E ratio, the more investors are willing to pay for the stock. So what is the P/E ratio? The P/E ratio divides the price of the stock by the earnings per share. Over the years, studies have shown that the P/E ratio is somehow related with the growth of a company. Now the higher the P/E ratio, the more growth the company is supposed to have. So it can be either the company is growing real fast of the investor have high hopes of its growth. Now these hopes can be realistic or foolish, you never know!
Growth companies are usually adolescent companies usually in sectors like computers, technology, telecom while value companies are mature companies usually in sectors like insurance, banking, manufacturing. Now, if you follow financial news than you must know that the large growth companies always grab the headlines. But do the growth stocks really make best investment? The lower the P/E ratio, the more value the company has. Low P/E ratio companies are not considered to be the movers and shakers in the market. Is there any statistical study that can guide us as to the performance of these different categories of stocks? Eugene Fama did seminal research on stocks and stock market s in’70s. Most of his results were startling and broke many myths. According to Fama and French, two famous researchers who did ground breaking research on stocks, over the last 77 years, large growth stocks have only seen 9.9% annualized rate of return as compared to 11.5% for the large value stocks.
So most of these growth stocks become highly popular in a small period of time! Everyone rushes to buy these growth stocks thinking that they are great investments. The most probable cause seems to be their immense popularity. Since most of the headlines are captures by high growth companies, investors seem to think that they are the best investments. Now intuitively you might have thought that growth stocks are better. What can be the reason for their lower performance over the years?
Let’s go back to the IPO of Google. Think about Google, how its stock price shot up within a matter of weeks after it hit the market. Weeks after that it began to cool off. In 2007, Google stock was selling something around $500. So large growth stocks tend to get overpriced before you are able to buy them!
Mr. Ahmad Hassam has done Masters from Harvard University.
http://www.colorofcredit.com/growth-stocks/
06.12.2009 | Author: Ahmad Hassam | Posted in real estate
When you start looking for good stocks, you often come across these terms like large cap, mid cap, small cap, growth and value. Let’s discuss these terms for a moment. Capitalization or cap refers to the combined value of all the share of a company’s stocks. The division between large cap, mid cap and small cap are often blurry and not sharp.
However the following divisions are generally accepted: Large caps are companies with over $5 Billion in capitalization. Mid caps are companies with $1 to $5 Billion in capitalization and small caps are companies with $250 million to $1 Billion in capitalization. Anything below $250 million can be considered as micro cap. Now the most important term that you come across is growth stocks and value stocks. How do you determine this is a growth stock or a value stock? Perhaps the most important ratio is the Price to Earnings Ratio (P/E).
Perhaps the most important ratio is the Price to Earnings Ratio (P/E). Now the most important term that you come across is growth stocks and value stocks. How do you determine this is a growth stock or a value stock? Suppose, company ABC stock is presently selling for $50. Now suppose that last year company ABC earned $5 for every share of the stock outstanding. This means stock ABC P/E ratio is 50/5=10. So the higher the P/E ratio, the more investors are willing to pay for the stock. What is the P/E ratio? The P/E ratio divides the price of the stock by the earnings per share.
Let’s make this clear with an example. Do you know how to read the balance sheet of a company? One of the most important things in doing research on a stock is the balance sheet of the company. Suppose, company ABC stock is presently selling for $50. Now suppose that last year company ABC earned $5 for every share of the stock outstanding. This means stock ABC P/E ratio is 50/5=10. So the higher the P/E ratio, the more investors are willing to pay for the stock. So what is the P/E ratio? The P/E ratio divides the price of the stock by the earnings per share. Over the years, studies have shown that the P/E ratio is somehow related with the growth of a company. Now the higher the P/E ratio, the more growth the company is supposed to have. So it can be either the company is growing real fast of the investor have high hopes of its growth. Now these hopes can be realistic or foolish, you never know!
Growth companies are usually adolescent companies usually in sectors like computers, technology, telecom while value companies are mature companies usually in sectors like insurance, banking, manufacturing. Now, if you follow financial news than you must know that the large growth companies always grab the headlines. But do the growth stocks really make best investment? The lower the P/E ratio, the more value the company has. Low P/E ratio companies are not considered to be the movers and shakers in the market. Is there any statistical study that can guide us as to the performance of these different categories of stocks? Eugene Fama did seminal research on stocks and stock market s in’70s. Most of his results were startling and broke many myths. According to Fama and French, two famous researchers who did ground breaking research on stocks, over the last 77 years, large growth stocks have only seen 9.9% annualized rate of return as compared to 11.5% for the large value stocks.
So most of these growth stocks become highly popular in a small period of time! Everyone rushes to buy these growth stocks thinking that they are great investments. The most probable cause seems to be their immense popularity. Since most of the headlines are captures by high growth companies, investors seem to think that they are the best investments. Now intuitively you might have thought that growth stocks are better. What can be the reason for their lower performance over the years?
Let’s go back to the IPO of Google. Think about Google, how its stock price shot up within a matter of weeks after it hit the market. Weeks after that it began to cool off. In 2007, Google stock was selling something around $500. So large growth stocks tend to get overpriced before you are able to buy them!
Mr. Ahmad Hassam has done Masters from Harvard University.
http://www.colorofcredit.com/growth-stocks/
Many Mutual Funds Are Up 50% in '09 — But Beware
Many Mutual Funds Are Up 50% in '09 — But Beware
By Janet Morrissey Sunday, Dec. 06, 2009
Read more: http://www.time.com/time/business/article/0,8599,1945880,00.html#ixzz0YydcoP0W
It's been a great year for many mutual fund investors. Standard & Poor's Equity Research reports that 165 equity mutual funds are up at least 47% through October 31st, or at least double the return of the S&P 500.
While investors in those funds should feel euphoric, S&P is quick to issue a warning to investors who might fall victim to those seductive returns. The S&P report, issued Friday, indicates that many of the best-performing funds relied on short-term strategies and paid little attention to the underlying fundamentals of the stocks in their portfolios, which could lead to a performance problem in 2010. "Using only a backward-looking approach to selecting funds [i.e., past performance] has significant flaws because it ignores the fundamentals of the stocks owned by the fund along with relevant risk and cost factors of the fund," the report said.
Of the 165 domestic equity funds that at least doubled the market's return, only 12% are ranked as S&P five-star funds. In fact, 19% are now ranked with a one- or two-star rating, effectively placing them in the bottom half of funds on overall attractiveness. "These funds have relatively weak fundamentals that contribute negatively to the ranking," S&P's analyst note in their report. The reasons cited for such low star rankings: Many own overvalued or risky stocks, have managers with short tenures, have high costs or offer poor long-term performance.
The S&P research team cited Hotchkis & Wiley Mid-Cap Value Fund, Legg Mason Capital Management Opportunities Trust and Fidelity Select Automotive Portfolio as examples of funds that had eye-popping 2009 returns, but are currently ranked as two-star funds by the S&P.
The Hotchkis & Wiley Mid-Cap Value Fund is up 52% so far this year, making it the fifth-best performing mid-cap value fund this year, according to Morningstar. However, S&P believes the fund's "volatile longer-term performance should give investors cause for concern." It noted that the fund significantly lagged its peer average in 2007 and 2008, pushing it into the bottom quartile on a three- and five-year total return basis. Also, S&P analysts contend the fund's securities are currently overvalued and pose risk based on their growth and consistency when it comes to historical earnings and dividends. It also cited the fund's cost factors as contributing to the fund's weaker ranking.
However, Stan Majcher, principal and portfolio manager of the Hotchkis & Wiley Mid-Cap Value Fund, disagrees. Majcher noted that his fund has a strong long-term performance record, as Morningstar currently ranks it the third best performing mid-cap fund when it comes to annualized returns over the past 10 years, with an annualized return of 10.85%. He acknowledges the fund underperformed in 2007 and 2008, but doesn't think these periods should be considered in isolation.
Majcher says his fund's strategy is to seek out stocks that are wrongly considered risky or overvalued. "We screen for and invest in securities that are misunderstood," he says. "We'll tend to have stocks that look like they have poor characteristics, but when you dig a lot deeper, they don't." He said many of these companies have "temporary issues" that will go away and lead to higher stock performance. His portfolio trades at less than 10 times earnings, which is not overvalued, Majcher contends. "The portolio trades at less than 10 times earnings and the market trades significantly higher than that - usually 14 or 15 times."
He also noted that he's been managing the portfolio since 1999, which should wipe out concerns about "short tenures."
"We've been around for 10 years and this isn't the first time we've screened poorly," Majcher says, "but we have actually have good performance over the period."
On the postive side, S&P named the Pin Oak Aggressive Stock fund as an example of a fund that performed strongly in 2009 and remains a good bet for 2010. The fund is up 71% so far in 2009 and "scored positively on S&P Fair Value and for its low-cost factors-components in the S&P fund ranking." The fund's portfolio manager, Mark Oelschlager, says his fund always seeks out stocks based on valuation and long-term investment. His fund started moving into cyclical stocks and increasing risk late last year at a time when "fear was rampant" in the market because "it was mispriced," he says. "We pay a lot of attention to valuation," adds Oeslschlager. "This paid off this year and we think it will pay off next year as well."
Oelschlager also noted that his firm keeps a low expense ratio, keeps trading costs down and manages its portfolio in a tax-efficient manner.
Such factors are the ones to consider, says S&P analyst Todd Rosenbluth, along with fundamentals, risk, performance track record and cost factors. "Before making a selection, make sure to look at not just the gains the fund may have achieved this year, but also aim to understand the fundamentals of its performance, risk and cost factors," he said, in a statement. "This year's top fund could repeat their success in 2010 or be next year's bottom funds."
Read more: http://www.time.com/time/business/article/0,8599,1945880,00.html#ixzz0YydSEPCl
By Janet Morrissey Sunday, Dec. 06, 2009
Read more: http://www.time.com/time/business/article/0,8599,1945880,00.html#ixzz0YydcoP0W
It's been a great year for many mutual fund investors. Standard & Poor's Equity Research reports that 165 equity mutual funds are up at least 47% through October 31st, or at least double the return of the S&P 500.
While investors in those funds should feel euphoric, S&P is quick to issue a warning to investors who might fall victim to those seductive returns. The S&P report, issued Friday, indicates that many of the best-performing funds relied on short-term strategies and paid little attention to the underlying fundamentals of the stocks in their portfolios, which could lead to a performance problem in 2010. "Using only a backward-looking approach to selecting funds [i.e., past performance] has significant flaws because it ignores the fundamentals of the stocks owned by the fund along with relevant risk and cost factors of the fund," the report said.
Of the 165 domestic equity funds that at least doubled the market's return, only 12% are ranked as S&P five-star funds. In fact, 19% are now ranked with a one- or two-star rating, effectively placing them in the bottom half of funds on overall attractiveness. "These funds have relatively weak fundamentals that contribute negatively to the ranking," S&P's analyst note in their report. The reasons cited for such low star rankings: Many own overvalued or risky stocks, have managers with short tenures, have high costs or offer poor long-term performance.
The S&P research team cited Hotchkis & Wiley Mid-Cap Value Fund, Legg Mason Capital Management Opportunities Trust and Fidelity Select Automotive Portfolio as examples of funds that had eye-popping 2009 returns, but are currently ranked as two-star funds by the S&P.
The Hotchkis & Wiley Mid-Cap Value Fund is up 52% so far this year, making it the fifth-best performing mid-cap value fund this year, according to Morningstar. However, S&P believes the fund's "volatile longer-term performance should give investors cause for concern." It noted that the fund significantly lagged its peer average in 2007 and 2008, pushing it into the bottom quartile on a three- and five-year total return basis. Also, S&P analysts contend the fund's securities are currently overvalued and pose risk based on their growth and consistency when it comes to historical earnings and dividends. It also cited the fund's cost factors as contributing to the fund's weaker ranking.
However, Stan Majcher, principal and portfolio manager of the Hotchkis & Wiley Mid-Cap Value Fund, disagrees. Majcher noted that his fund has a strong long-term performance record, as Morningstar currently ranks it the third best performing mid-cap fund when it comes to annualized returns over the past 10 years, with an annualized return of 10.85%. He acknowledges the fund underperformed in 2007 and 2008, but doesn't think these periods should be considered in isolation.
Majcher says his fund's strategy is to seek out stocks that are wrongly considered risky or overvalued. "We screen for and invest in securities that are misunderstood," he says. "We'll tend to have stocks that look like they have poor characteristics, but when you dig a lot deeper, they don't." He said many of these companies have "temporary issues" that will go away and lead to higher stock performance. His portfolio trades at less than 10 times earnings, which is not overvalued, Majcher contends. "The portolio trades at less than 10 times earnings and the market trades significantly higher than that - usually 14 or 15 times."
He also noted that he's been managing the portfolio since 1999, which should wipe out concerns about "short tenures."
"We've been around for 10 years and this isn't the first time we've screened poorly," Majcher says, "but we have actually have good performance over the period."
On the postive side, S&P named the Pin Oak Aggressive Stock fund as an example of a fund that performed strongly in 2009 and remains a good bet for 2010. The fund is up 71% so far in 2009 and "scored positively on S&P Fair Value and for its low-cost factors-components in the S&P fund ranking." The fund's portfolio manager, Mark Oelschlager, says his fund always seeks out stocks based on valuation and long-term investment. His fund started moving into cyclical stocks and increasing risk late last year at a time when "fear was rampant" in the market because "it was mispriced," he says. "We pay a lot of attention to valuation," adds Oeslschlager. "This paid off this year and we think it will pay off next year as well."
Oelschlager also noted that his firm keeps a low expense ratio, keeps trading costs down and manages its portfolio in a tax-efficient manner.
Such factors are the ones to consider, says S&P analyst Todd Rosenbluth, along with fundamentals, risk, performance track record and cost factors. "Before making a selection, make sure to look at not just the gains the fund may have achieved this year, but also aim to understand the fundamentals of its performance, risk and cost factors," he said, in a statement. "This year's top fund could repeat their success in 2010 or be next year's bottom funds."
Read more: http://www.time.com/time/business/article/0,8599,1945880,00.html#ixzz0YydSEPCl
AIG Reduces Fed Borrowings by $25 Billion
AIG Reduces Fed Borrowings by $25 Billion
By AP / STEPHEN BERNARD Tuesday, Dec. 01, 2009
(NEW YORK) — American International Group Inc. on Tuesday slashed the amount of money it owes the government by $25 billion as it moved two subsidiaries into special holding units ahead of their planned spinoff or sale.
AIG moved American International Assurance Co. and American Life Insurance Co. into special purpose vehicles, which are used ahead of a move to separate a unit from a parent company. The government is receiving preferred equity stakes in the two life insurance companies worth $25 billion in exchange for a reduction in the amount of money AIG owes the government.
AIG will continue to hold the common stakes in AIA and Alico until it determines whether to complete initial public offerings for the companies or sell them privately. No timetable yet has been announced for when an IPO or sale will be completed.
Shares of the conglomerate based in New York rose $1.49, or 5.2 percent, to $29.89 in premarket trading.
AIG was bailed out by the government last fall at the peak of the credit crisis. As losses continued to pile up, the government eventually extended AIG an aid package worth more than $180 billion. The government also received a nearly 80 percent stake in AIG in return for the support.
The insurance giant has been selling assets and spinning off divisions in an effort to help repay the government debt.
As of Sept. 30, AIG had tapped $122.31 billion of the aid package and owed the government $85.66 billion in loans. Tuesday's separation of AIA and Alico would reduce the outstanding aid package to $97.31 billion and the amount owed in loans to $60.66 billion. "AIG continues to make good on its commitment to pay the American people back," AIG CEO Robert Benmosche said in a statement.
The government received a preferred stake in AIA, an Asian life insurer with more than 20 million customers, worth $16 billion. The preferred stake in Alico, an international life insurance firm that operates in more than 50 countries around the world offering life and health insurance, is worth $9 billion.
AIG said it would take a $5.7 billion charge during the fourth quarter tied to accelerating the moves of AIA and Alico into separate, stand-alone units.
Benmosche reiterated AIG continues to expect volatility in quarterly results as the insurer continues to restructure its operations to repay the government.
The plan to separate AIA and Alico and give the government $25 billion in preferred shares of the two companies was first announced in late June. AIG had been discussing sales of the units as early as March.
Read more: http://www.time.com/time/business/article/0,8599,1943739,00.html#ixzz0Yy1gaCuf
By AP / STEPHEN BERNARD Tuesday, Dec. 01, 2009
(NEW YORK) — American International Group Inc. on Tuesday slashed the amount of money it owes the government by $25 billion as it moved two subsidiaries into special holding units ahead of their planned spinoff or sale.
AIG moved American International Assurance Co. and American Life Insurance Co. into special purpose vehicles, which are used ahead of a move to separate a unit from a parent company. The government is receiving preferred equity stakes in the two life insurance companies worth $25 billion in exchange for a reduction in the amount of money AIG owes the government.
AIG will continue to hold the common stakes in AIA and Alico until it determines whether to complete initial public offerings for the companies or sell them privately. No timetable yet has been announced for when an IPO or sale will be completed.
Shares of the conglomerate based in New York rose $1.49, or 5.2 percent, to $29.89 in premarket trading.
AIG was bailed out by the government last fall at the peak of the credit crisis. As losses continued to pile up, the government eventually extended AIG an aid package worth more than $180 billion. The government also received a nearly 80 percent stake in AIG in return for the support.
The insurance giant has been selling assets and spinning off divisions in an effort to help repay the government debt.
As of Sept. 30, AIG had tapped $122.31 billion of the aid package and owed the government $85.66 billion in loans. Tuesday's separation of AIA and Alico would reduce the outstanding aid package to $97.31 billion and the amount owed in loans to $60.66 billion. "AIG continues to make good on its commitment to pay the American people back," AIG CEO Robert Benmosche said in a statement.
The government received a preferred stake in AIA, an Asian life insurer with more than 20 million customers, worth $16 billion. The preferred stake in Alico, an international life insurance firm that operates in more than 50 countries around the world offering life and health insurance, is worth $9 billion.
AIG said it would take a $5.7 billion charge during the fourth quarter tied to accelerating the moves of AIA and Alico into separate, stand-alone units.
Benmosche reiterated AIG continues to expect volatility in quarterly results as the insurer continues to restructure its operations to repay the government.
The plan to separate AIA and Alico and give the government $25 billion in preferred shares of the two companies was first announced in late June. AIG had been discussing sales of the units as early as March.
Read more: http://www.time.com/time/business/article/0,8599,1943739,00.html#ixzz0Yy1gaCuf
Sunday 6 December 2009
Listing abroad not easy for local firms, insiders say (Vietnam)
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
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
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
----
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.
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