Last updated: Monday, April 24, 2017
Investment Fund Divestments: Opportunities for Bottom Fishing InvestorsPosted: Friday, October 14, 2016
Since early September, Vietnam's stock market has seen complicated movements, especially with the divestment of foreign shareholders. This is partly explained by some investment funds that will end up their operations or perform portfolio restructuring. In any case, the divestment of foreign investors is opening up opportunities for other investors participating in the market.
A series of investment funds divest
First and foremost, the Red River Holding Fund (RRH) divested their investment on September 9, 2016 by successfully selling over 3.6 million shares of FPT. After this divestment, RRH is no longer a major shareholder of FPT when its share ratio has fallen from 5.38 per cent ownership (equivalent to 24.7 million shares) to 4.58 per cent (equivalent to 21 million shares). Previously, this fund also sold 2 million shares of Vinh Hoan Corporation (VHC) and had more than 3 million shares transferred to the subsidiaries of Minh Phu Seafood (MPC).
Next is the Mekong Enterprise Fund II LTD (MEF II), who plans to sell more than 2.7 million shares of the Mobile World Group from September 21 to October 20. It is expected that if this divestment is successful, the MEF II would earn more than VND360 billion. Along with that, this fund will also divest from some large companies such as Phu Nhuan Jewelry JSC (PNJ), FPT Corporation, and Nam Long Investment Joint Stock Company (NLG).
The Dragon Capital also recently announced that the fund has sold 200,000 shares of Hoa Phat Group (HPG). The total shares of the HPG managed by Dragon Capital have fallen from 42.2 million to 42 million shares. Thus, after this transaction, the percentage of ownership of Dragon Capital has been reduced from 5.01 to 4.98. With this ratio, Dragon Capital is no longer the largest shareholder of Hoa Phat.
Many other funds such as Deutsche Bank, Private Equity New Markets II K/S, and Vina Capital also have divested from the HPG. Since the beginning of the year, the total number of shares divested from the HPG is 14.3 million shares.
The following is ASPL V6 fund that has divested their 1.7 million shares, reducing the total number to 3.9 million, equivalent to 2.75 per cent ownership percentage from the NLG. Earlier, the ASPL V6 Ltd was one of the major shareholders of the NLG with the ownership of 15.6 million shares, equivalent to 16.32 per cent of the capital.
Negative impacts on the market
In fact, the investor sentiment in recent years has been affected by the trend of withdrawing capital from the market of foreign shareholders. However, from the perspective of the economists, the divestment of foreign investment funds is inevitable because after a period of investment, the shares were worth more than they are forced to realise their profits.
In another aspect, Phan Dung Khanh, Investment Consultancy Director of Maybank KimEng Securities said that, in fact, the divestment of foreign investment funds began earlier this year and simply became more vibrant in September, because it is the deadline of the operation of some financial institutions and investment funds. In addition, some funds are having their portfolio restructured by switching to new investment opportunities. This takes place in the favourable context of the stock market, which makes the sale of shares easier than before.
Mr Khanh said: “If the investment fund continues to withdraw capital from the market at a rapid pace, this will be a negative signal affecting the psychology of domestic investors, who are excited at this stage. In particular, the phenomenon of some foreign investment funds that draw investment in leading blue-chips will have direct impact on market trends.”
Given the volatility of fund certificates of major exchange traded funds (ETFs), the representatives of stock market companies said, no signs of hot money withdrawn from the stock market of Vietnam have been shown. Besides, even many shares are being sold, the reciprocal demand of domestic investors are very active, showing through a push of the market in recent sessions.
As usual, the divestment of the ETFs on the market in recent time has been set, based on the business cycle of these funds. September is the period when the ETF will withdraw or make a small purchase on the stock market. By September 16, the ETFs completed restructuring their portfolios and this is the most powerful structuring of the ETFs in the last few years. The value of the foreign shares sold in the last session was up to VND1,500 billion, but the cash flow in the country has not changed much.
That the investment funds shares sold strongly has made these shares, as well as the large-cap stocks, decrease sharply in recent years, which makes the whole floor indices and smaller goods codes be impacted negatively. The whole line of blue-chips stocks such as VCB, VNM, and SHB are in this downtrend, which inevitably creates favourable opportunities for investors to implement bottom fishing stocks.