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ICV liquidation not a threat to Vietnam’s stock market
Analysts have reassured investors that Indochina Capital Vietnam’s (ICV) liquidation will in no way negatively affect the stock market, and that the shares held by ICV are blue chips which investors will be able to purchase when ICV sells them.
ICV officially announced the orderly liquidation on September 4.
ICV’s net asset value (NAV) by the end of July 31 reportedly reached $243 million. Listed shares account for 37.9 percent of NAV, unlisted shares account for 4.3 percent, private equity 11.2 percent, bonds 0 percent, while cash and other assets account for 46.7 percent of NAV.
However, analysts have affirmed that the liquidation is not bad news for the market for several reasons.
First, ICV’s liquidation, in fact, is not new news. Information about the capital withdrawal was first spread in February, 2009, when the VN Index kept decreasing. However, this did not hinder the upward trend of the stock market.
The fund itself sold shares of some unprofitable companies recently in order to restructure investment portfolios. Therefore, the shares it is now holding are all ‘good commodities’. If ICV sells the blue chips, it will bring opportunities to other institutional investors to purchase the valuable commodities.
Second, the NAV of $243 million, or 4,374 billion dong of ICV, is small compared to the market’s scale – only equal to the trading value of one trading session of the two bourses.
The shares to be sold by ICV, analysts say, will be easily ‘absorbed’ by the market. Moreover, the volume of shares in ICV’s investment portfolio is not too big compared with the average daily trading volume of the shares.
Third, ICV’s liquidation may last one or more years. ICV said it will sell shares at suitable moments, while it will not barter shares away as many people think.
The Saigon Secrities Incorporated (SSI), in a report released since the announcement about ICV’s liquidation, quoted Beat Schuerch, a senior executive of ICV, as saying that ICV will only sell stocks when the market is in an upward trend, not when the index is sliding.
Fourth, the stock market in particular and the national economy have been recovering well, and ICV will not make the foolish move of trying to barter shares away when they well know that share prices will increase further.
Even though ICV sold shares of Viet-Han Corporation (VHG), VHG shares still increased in price and the demand was high for a month. Meanwhile, the price of the shares decreased only when ICV stopped selling shares. This shows that domestic investors are always ready to purchase good shares if they find the prices reasonable.
And fifth, the time when domestic investors followed the moves of foreign investors has passed. Domestic investors now make investment decisions based on their analysts, while they do not make purchases or sales just simply by following the crowd.
Which shares will be affected by ICV’s sale?
According to SSI, blue chips account for 91.56 percent of ICV’s listed portfolio.
1/ Bao Viet shares (BVH) now listed on the HCM City Stock Exchange (HOSE). The share now has the price of 39,000 dong. SSI thinks that BVH is now valued at a price level much higher than the prices of other insurance shares (the P/E of BVH is now 26x, while the P/E of BMI, PVI and VNR are some 14-16x).
BVH may be influenced when ICV sells BVH. However, SSI believes that this will make the price of BVH more reasonable and attract more investors.
2/ Refrigeration Engineering Enterprise (REE). The price of the share is 46,100 dong. If the sale of ICV makes the REE price go down, this will be a good opportunity for investors to purchase them.
3/ The Corporation for Financing and Promoting Technology (FPT). The share volume ICV is holding is just equal to FPT’s five-day trading volume; the influence from the sale of ICV will not be big.
4/ ICV is now holding 1.9 million shares of GMD (Gemardept, a freight and forwarding company), which is not a big volume. If the sale makes GMD’s price decrease, this will be a good opportunity for investors to purchase shares.
5/ SSI also believes that the sale of ICV will not much affect the price of DPM, a fertiliser and petrochemical company, since the volume of shares ICV is holding is just equal to a three-day trading volume of the share.
6/ Phuoc Hoa Rubber Company (PHR) is expected to bear the most pressure from sales by ICV. SSI believes that if the price falls to below 40,000 dong per share, the share will become attractive to investors.
7/ Vietnam Dairy Products Company (VNM): SSI believes that with the plan to liquidate shares within 12-18 months, the possible share supply increase and the pressure of selling VNM at low prices will be much lower than investors’ think.
8/ Vietcombank’s shares: There will not be any big influence on Vietcombank share increases.
VietNamNet, DT, TBKTVN
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