A majority of listed companies have reported business results of the first six months for nearly a month and many made very impressive earnings. However, good corporate earnings seem not to be enough to restore investor confidence in the stock market.
Lackadaisical attitude
The Vietnamese stock market has perhaps never experienced such a lacklustre situation, as investor confidence has eroded for a very long time, weighed down by a lengthy losing streak.
The time from June to July is considered a very sensitive point as listed companies start reporting corporate earnings. Nguyen Minh Phuong, a specialist at ACB Securities Company, said that this is also an emotional time for stock investors. After losing in 10 consecutive sessions to close at 386.4 points in late May, near a 27-month low, the VN-Index rebounded in six consecutive sessions but then returned to a bearish sideways.
It came as a surprise that shares of good-performing companies did not go up correspondingly when the market recovered, and the traded volume or liquidity of these shares did not improve when the market underwent corrections.
Meanwhile, highly speculative stocks belonging to securities industry like Bao Viet Securities Company (BVS), Saigon Securities Inc (SSI), Kim Long Securities Joint Stock Company (KLS) and VNDirect Securities Joint Stock Company (VND), or real estate industry like Investment & Trading of Real Estate Joint Stock Company (ITC) and Vincom Joint Stock Company (VIC) caught the interest of many investors, although they faced a thorny dilemma caused by high borrowing costs. Shares of debt-burdened companies still gained ground when the stock market revived.
Listed companies are releasing corporate earnings in the second quarter of 2011. Many businesses, especially natural rubber firms like Dong Phu Rubber Joint Stock Company (DPR), Phuoc Hoa Rubber Joint Stock Company (PHR) and Thong Nhat Rubber Joint Stock Company (TNC), or seafood companies like Minh Phu Seafood Corporation (MPC) posted impressive profits but their stocks did not generate any significant industry wave. Large-scale well performing companies like Viet Nam Dairy Products Joint Stock Company (VNM), PetroVietnam Fertilizer and Chemicals Corporation (DPM), PetroVietnam Drilling and Well Services Joint Stock Company (PVD), Hoa Phat Group Joint Stock Company (HPG), FPT Corporation (FPT), Viet Nam Joint Stock Commercial Bank for Industry and Trade or Vietinbank (CTG) and Joint Stock Commercial Bank for Foreign Trade of Vietnam or Vietcombank (VCB) hold little interest for investors.
The market continues challenging investor confidence, as only 26 companies on the Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX) gained more than 10 percent as of July 20, but one of the aforementioned businesses are in this group.
Best outperformer is the HNX-listed Vinh Phuc Infrastructure Development Joint Stock Company (IDV), after the Vinh Phuc province-based company reported VND12 billion net profit in the first six months, fulfilling as much as 90 percent of the full-year target. This information triggered the most spectacular rising run in the history of this stock. It rose from VND15,200 on May 27 to VND32,000 on June 30. Nonetheless, such a case is rare.
High revenue, low profit
For stock investors, business results in the second quarter evidenced impacts of tight monetary policy. Interest rate tension was at its height in this quarter. Besides, listed companies will have their half-year financial statements reviewed or audited by independent audit companies. This much-expected information will be more reliable, particularly data relating to provisions.
Mr Le Xuan Vinh, Director of Research and Analysis Department, SJC Securities Company, said: A lot of second-quarter earnings reports trailed forecasts, particularly financial, securities, real estate and debt-burdened companies. Many companies may have to revise down their business targets as they did in 2009 and 2010.
According to data compiled by Viet Dragon Securities Corporation, second-quarter revenues of listed companies rose 50 percent from the year earlier, but profit climbed just 2.4 percent. Profit rise was seen only in companies little impacted by tightened monetary policy, like rubber, pharmaceutical, oil, gas, or large scale companies. Real estate, construction, building material and securities companies reported very poor earnings in the second quarter. Besides, financial costs in this quarter also soared. The clearest evidence was borrowing costs, as companies had not found an alternative to bank loans. But, loaning has become a huge risk because accounts receivable may be turned into overdue debts, nonperforming debts or bad debts.
According to Mr Le Xuan Vinh, under the current context and based on business health measuring factors like debt-capital ratio, cash turnover, inventory and cash flows, the most important factor is working cash flow, not profit margin.
Moreover, companies can use some financial professions to record profit in the second quarter. Hence, profitability does not mean much, although earnings reports are audited.
Dinh Thanh
Vietnamese
