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Listed firms mark securities to market, report heavy losses
Many listed companies reported big losses last year after marking to market their depreciated stock market investments and creating a reserve equivalent to nominal losses.
Many of the companies, who were sitting on huge piles of cash following share offerings in 2006 and 2007 when the stock market was booming, invested in securities, hoping to make a quick buck.
General Forwarding & Agency Joint Stock Co., the country’s biggest freight-forwarding company, suffered a huge nominal loss last year after the stock market’s plunge hit its securities portfolio.
The firm, known as Gemadept, recorded a loss of more than VND160 billion (US$9.1 million) last year and was Friday placed on a watch list of loss-making firms.
The earnings of other major listed firms including Refrigeration Electrical Engineering Corp. (REE) and Hai Phong Paper Joint Stock Co. were also hit badly.
REE, an air conditioner maker, posted a loss of VND139.3 billion, while Hai Phong lost VND67 billion. Both blamed equity losses.
Analysts said many of the companies were forced to invest in stocks since they were under heavy pressure from shareholders, who demanded steady profit growth and a share of the massive premiums they collected from their share issues.
In early 2008 Gemadept had a registered capital of VND475 billion ($27 million) but a reserve of VND1.4 trillion.
The chief executive of a foreign fund, who wished to remain unnamed, said he had warned the chairpersons of several listed firms, who are also members of his company’s board, about the risks involved in making equity investments, but they had ignored his warnings.
Analysts expect listed firms like REE and Gemadept, whose main business are consistently profitable, to quickly recover this year.
The latter said in its latest earning report that it set up a VND126.2 billion provision after marking to market a VND255.5 billion short-term investment, and VND127.6 billion for a VND681 billion long-term investment.
But the analysts are very worried about other, less profitable companies, especially with the economy facing a downturn.
Thoi bao Kinh te Saigon
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