The lacklustre performance of the stock market has stubbornly dragged on although Vietnam’s economy has passed the toughest time. Perhaps, it is time for the board of listed companies to adopt solutions, together with the support of the Government and State management agencies, to valorise the stock market.
According to the Vietnam Financial Investors Association (VAFI), listed companies should quickly provide additional or fresh information about business plans for the third and fourth quarters of 2011. Mr Nguyen Hoang Hai, General Secretary of VAFI, analysed that the business environment is significantly impacting production and business operations of the business community, and a part of that community will perhaps fail to complete plans in 2011; a part will complete their plans; and a part with good governance and powerful capacity will earn much from competitive edges and short-term and long-term financial positions.
However, at present, a majority of individual investors have a negative outlook on production and business situations because of unclear, inadequate and inaccurate information and assessments. They have not identified the financial situations of some businesses on the verge of dissolution and bankruptcy, as the liquidity of shares of these companies is still very high. Worse, many investors have excessive worries about business and production activities of companies.
Therefore, the boards of directors of listed companies should announce information about business plans for the third and fourth quarters of 2011 for investors to have an accurate assessment, let pass excessive anxieties and confusions, as well as avoid panic sell-offs, said Mr Hai. The disclosure of this information is very important and will help stabilise the stock market.
Besides, according to the VAFI, some listed companies should pay one-time dividends in August or September 2011. The association pointed out that high interest rates result in rising financial expenses and affect their financial positions; therefore, using up their own capital is very important. Nonetheless, many companies have strong financial capacity, low debt ratio in relation to their peers, small amount of capital for their projects, little-impacted or even growing business from 2010. Some have delayed cash dividend payments arranged in late 2010 to purchase treasury shares. This is a praiseworthy move, but it is perhaps not as good as dividend payment under the current situation. Financially healthy companies (10 -15 percent of listed companies) can pay cash dividend of 5 - 10 percent in September or October 2011.
In the current hard times, cash is essential for businesses because it promises better investment opportunities but it is also very necessary and important for shareholders and the stability of the stock market. “After receiving the dividend (small relative to their investments, though), shareholders will spend it back in the stock market because the rate of returns is very high in the long term, particularly for good selective picks. If many listed companies settle dividend payments in August and September 2011, this will create a strong cash flow for the market (compared to the current context) and may help heat up the market, paving the way for its recovery at the end of the year,” Mr Hai noted.
Recently, many insiders announced share purchases. This is a praiseworthy action because it helps stabilise market share prices. If more insiders respond to this move, the impact on the market will be stronger.
Quynh Anh
Vietnamese
