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Foreign investment funds going different route for money
Many investment funds have begun selling bonds for capital as they still cannot profit from their investments in private companies as the companies cannot list on the bourse as previously planned.
Money getting stuck
“We want to withdraw capital from the company now, but we can’t, and so all we can do now is to wait,” the director of a foreign investment fund said.
The fund, like many others, did not make investment in listed shares, but purchased stocks of unlisted companies, hoping to resell the stocks later for profit when the companies upgraded and listed on the bourse. Tan Dai Hung, Intresco, Truong Thanh and Dien Quang Lamp are typical examples of this kind of investment. In general, each of the deals takes from two to three years.
The problem of the said investment fund is that it cannot take back investment capital now to restructure its investment portfolio. As the company has not listed on the bourse yet, it still cannot profit from its investment.
In fact, very few companies have entered the bourse this year with stock prices falling almost continuously.
There are three reasons for this. First, the State Securities Commission (SSC) has not encouraged companies to list by being stern in considering listing applications. Second, companies themselves have not wanted to list as they don’t want to see their shares debut on the bourse with low prices. These include big names like Vietcombank, East Asia Bank and Habubank. Third, institutional investors don’t want the companies they have injected money into to list on the bourse.
Institutional investors don’t want to see losses when they restructure their investment portfolios and calculate net asset value (NAV). Sumitomo Mitsui purchased 15% of stakes of Eximbank at VND56,000/share, while Eximbank’s shares are selling at VND22,300/share only on the OTC market. If Eximbank lists on the bourse now with such a reference price, Sumitomo would see heavy losses.
Selling bonds to transfer money home
As foreign investment funds have failed to earn money from their investments, they are selling bonds to transfer money abroad, according to a fund director.
Foreign investors sold big volumes of bonds in September and October. The total transaction volume of bonds from the beginning of October to October 21 was VND18,244bil, or $1.1bil. This is a big volume if noting that foreigners’ bond transactions totalled VND12,548bil in August and VND11,636bill in September.
Observers say that the domestic foreign currency market has seen some changes. The greenback price tends to rise slightly in the afternoon, when people believe foreign investors purchase dollars to remit abroad.
As commercial banks have profuse dollars, they can easily meet the demands of foreign investors. However, the director of a domestic fund said that supply is running low as a big volume of dollars, estimated at $500mil, has been sold in a short time, though it is unclear how much money foreign investment funds have transferred abroad.
Analysts believe that foreign investment funds will still sell bonds in the immediate time. It has been suggested that parent companies of foreign funds now want to have money in hand to purchase assets which are decreasing sharply in price in the US.
VNN
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