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What’s behind big institutions’ massive sale of stocks?
News that a lot of big institutions have sold or plan to sell big volumes of shares has sparked worries among investors about a new wave of stock clearance. However, the institutions themselves have reassured the public that they just want to restructure their investment portfolios.
Vietnam’s stock market has seen a strong recovery since March 2009, with the VN Index up by 236 points from their recession lows. Therefore, it seems to be difficult to understand why many big institutional investors are hurrying to sell stocks.
PetroVietnam Finance Corporation (PVFC), for example, announced in May and June that it would sell big volumes of stocks. The corporation has registered to sell 10 million shares in total, mostly in companies in the oil and gas-related fields.
Foreign institutional investors, whose every move is being watched and analysed by domestic investors, have also registered to sell stakes.
The biggest recent deals were the sale of 6 million Vietnam Construction And Import - Export Joint Stock Corporation VCG shares by Grinling International and Balestrand on April 20-June 10. The investment funds now being managed by Dragon Capital have also marketed over 10 million Refrigeration Engineering Enterprise (REE), HCMC Infrastructure Investment SJ Company (CII) and Vietnam Dairy Products Company (VNM shares.
Besides, the personages from Saigon Securities Incorporated (SSI), PXP Asset Management, Wareham Group Limited, VOF Investment Limited, Mekong Enterprise Fund and many domestic institutions have also sold stocks in big quantity. At the Hanoi Securities Trading Centre (HASTC) alone, some days witnessed more than ten reports about the sale deals of institutions.
Are these sales normal or abnormal?
If such massive sales had occurred in 2008, it would have made people think that investors were trying to withdraw capital to escape from the market as a reaction to the global financial crisis.
However, such sales now, when the market is hot, is explained another way. Analysts believe that big institutions are selling stocks now simply to restructure their investment portfolios. Some others sell stocks to profit from the recent run-up in prices.
PVFC, for example, said that the sale of stocks is quite normal, a matter that was decided in the corporation’s business plan set up earlier this year. In 2008, PVFC made provision of 1,800 billion dong for financial investments and now it sells stocks when the prices are high. PVFC Chairman Nguyen Dinh Lam stressed that this was not the kind of ‘investment withdrawal’ because this is not investment principle of the corporation.
As for investment funds, Vietnam Asset Management (VAM) General Director Nguyen Xuan Minh, said that recent sharp increases of stock prices have prompted investors to sell shares to take profit.
“In the last couple of months, the market’s been overly hot. The prices of many stocks have been pushed up to the levels which are higher than their actual values and enterprises’ business potentials,” Minh said
He went on to say that recent sales of stocks by investors should be seen as a quite normal and reasonable move. “This will help adjust the market to obtain sustainable growth,” he added
Minh said that Vietnam’s stock market has been recovering on the basis of an improving national economy and that VAM remains confident about the long term potential of the market. VAM is planning to call for capital for its new funds in Vietnam. In the immediate time, it would be difficult to raise funds as foreign investors remain hesitant.
“However, if foreign investors hear that the national economy is better off and companies are strengthening, they will be interested in making investments in Vietnam,” Minh said.
A representative of a foreign investment fund declined to give detailed explanations about its recent sales, saying that this was the fund’s investment principle. However, he said that in fact, the deals were negotiated right at the beginning of the year, but they were only just recently accepted by the involved parties. “This was a favourable coincidence,” he said.
VietNamNet, TBKTVN
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