Businesses now keep indifferent to stock market

VietNamNet Bridge – Businesses once rushed to list their shares on the bourse, believing that the stock market is a good channel for them to mobilize capital. However, nowadays, when the VN Index fell by 22 percent, they have changed their mind.

Refusing to list shares for fear about stock price decreases

Two years ago, a manager of the Viet Tien Garment Company, in a talk with Thoi bao Kinh te Saigon, said that the company was considering listing shares on the HCM City Stock Exchange in 2010. However, recently, when asked about the listing plan, the manager said that Viet Tien would not list shares at this moment.

The manager said that the stock price keeps decreasing every day, which is not the good moment for businesses to enter the bourse. Viet Tien’s shares are being traded at 17,000 dong per share on the OTC market, and the manager said he wonders if the price level can be retained once Viet Tien list its shares on the bourse.

Meanwhile, Nguyen Khac Hanh, Finance Director of Cau Tre Company, which makes food products for export, said that the company applied for listing shares on June 5, 2010, but it has not entered the bourse yet.

According to Hanh, the company’s shareholders believe that 2011 is not the right time to list shares, because of the bad performance of the stock market, which makes the shares undervalued.

A lot of other businesses share the same view with Cau Tre, which explains why the number of businesses listing shares on both the Hanoi and HCM City bourses this year decrease sharply in comparison with 2010.

Tran Anh Dao, Head of the Listing Division of the HCM City Stock Exchange, in 2009, the HCM City Stock Exchange welcomed 80 companies listing their shares, while only 26 companies have listed shares so far this year.

Especially, Dao said, 162 applications for listing have been approved, but businesses still have not listed shares.

As for the Hanoi Stock Exchange, the number of companies listing shares also remains modest – 29, while the figure was four times higher in 2010 – 113 companies.

Dinh Quang Hoan, Finance Director of Ban Viet Securities Company, has revealed that Ban Viet only has given consultancy for listing shares on the bourse to two companies so far this year, the number which is much lower than that of the previous year.

Hoan said that a lot of enterprises once contacted his firm to discuss about the consultancy service, but they later decided to delay the plans since the stock price decreased so dramatically.

Hoan admitted that the sharp decrease of the number of clients has badly affected the business of securities companies, which explains why consultancy now cannot bring high revenue any more.

Unable to mobilize capital

In 2009-2010, when meeting difficulties in borrowing capital from banks, a lot of businesses, especially real estate firms, then decided to mobilize capital through the stock market.

However, the method has not been the choice of enterprises any more, since the VN Index keeps decreasing. Reports show that nearly 50 percent of the shares listing on the HCM City bourse are now traded at the prices below the face value (10,000 dong per share), while the figure is much higher – 64 percent – on the Hanoi bourse.

Recently, NVN, a housing development company, has decided to delay the plan to issue five million shares, because of the unfavorable conditions of the stock market. The price of the stocks has fallen to the levels, which are lower than the levels approved at the shareholders’ meeting. The price of NVN’s shares dropped to 9200 dong per share on November 14 and then to 8600 dong on November 21.

The shares of the Da Nang Steel Company (DNS) are being traded at 6200 dong per share.

According to the State Securities Commission (SSC), in the first six months of the year, the volume of capital mobilized through share issuance reached 6431 billion dong, which is equal to 40 percent of that of the same period of the last year.

Source: TBKTSG