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Diversified operations often cloud company perspectives
In the rush to capitalise on the booming property and financial markets, joint stock companies and major state economic groups poured money into those areas and lost sight of the need to invest in their own industry.
Between 2006 and 2007, dozens of companies listed on the HCM City stock market diverted the focus of their investments into the real estate and financial sectors.
In 2007 alone, 92 per cent of these companies were reaping the rewards.
The Bien Hoa Sugar Company is a typical example. Its turnover from financial investments doubled from nearly VND10 billion in 2006 to more than VND22 billion in 2007.
The Refrigeration Electrical Engineering Corporation (REE) earned up to VND190.3 billion (US$11.5 million) from its financial investments, accounting for half of its after-tax profits.
The company also had made considerable investments in real estate.
Others were keen not to be left out. They included many food porducers and garment and textile companies.
But experts are expecting the bubble to burst by the end of the year because the Government has decided to strictly control inflation.
In late March, Prime Minister Nguyen Tan Dung issued an order for corporations and State economic groups to set aside at least 70 per cent of their total capital to invest in their official businesses. This means there will be less money available for property and financial markets.
VNS
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