Entering the third quarter of 2016, the stock market has shown a strong revival as VN-Index has kept going up day after day. In addition to catalyst information on macro policies relating to the stock market, earnings reports by listed companies as well as mergers and acquisitions (M&As) produced very strong impacts on the market performance. According to many economists, M&A activity on the stock market is expected to be even more vibrant from now till the end of the year.
Unlike M&As on the real estate market, M&A transactions in the stock market take place more silently and do not draw public attention, but stock traders grasp such information very quickly. The long strong rally of a stock without official information disclosure concerning the company’s performances and overall market catalysts as well is a signal. According to stock investors, M&A deals will hit on the stock market from now to the end of this year. This will open up many opportunities for investors if they buy such stocks just in time.
Vingroup Joint Stock Company (VIC) will become a strategic partner of Truong Thanh Furniture Corporation (TTF), expected to take place by the end of 2016. In late February 2016, Tan Lien Phat Construction Investment Joint Stock Company, a subsidiary of VIC, legalised its 32.5 per cent ownership at TTF, after spending more than VND1,200 billion to buy into TTF. This information was officially announced in a document submitted to TTF shareholders at the 2016 Annual General Meeting of Shareholders. The most surprising information was that Tan Lien Phat Construction Investment Joint Stock Company took over shares owned by individuals to bring its stake at TTF to 69 per cent.
With VIC becoming a strategic partner of TTF, the HOSE-listed TTF stock rallied impressively, since many investors believed that the final ownership of Tan Lien Phat Construction Investment Joint Stock Company would not stop at 69 per cent.
Another attention-grasping deal is the State Capital Investment Corporation (SCIC)’s divestment from Binh Duong Mineral and Construction Joint Stock Company (KSB). SCIC divestment is causing curiosity and speculation to investors because they do not know who will purchase KSB shares. There is a popular rumour that Dream House Investment Corporation (DRH), which is now holding 10 per cent of KSB stake, will buy that stock, for the firm announced to raise its stake in KSB to 15 per cent after its Annual General Meeting. By this time, DRH may not stop at 15 per cent as announced previously. KSB stock price galloped from VND37,000 before SCIC divestment to VND81,0000 at present.
According to the latest announcement from DRH, the HOSE-listed firm will purchase 1.22 million KSB shares, also listed on HOSE, via order-matching method or put-through (negotiation) method. If DRH completes this buying, its ownership ratio in KSB will be above 20 per cent.
According to stock investors, DRH may increase its stake in KSB to 51 per cent in the near future and this is one of major drives to the KSB skyrocketing trend although the market lacks special supporting information.
Hoa An Joint Stock Company (DHA) and Construction Investment Corporation 3-2 (C32) also witnessed strong gains after the latter announced to lift its ownership in the former to 9 per cent. According to investors, C32’s move aims at a quarry owned by DHA. Therefore, the holding ratio of C32 may not stop at just 9 per cent as now. At present, C32 and DHA stocks are traded at VND58,500 and VND36,200. Both are mining companies.
Domesco Medical Import Export Joint Stock Corporation (DMC) also jumped high in the past time, driven by the rumour that a foreign shareholder would increase its ownership ratio in the HOSE-listed drug maker. Although this was just a rumour, it was enough to push up DMC stock. Currently, the largest shareholder of DMC is CFR International SPA, a subsidiary of the US-based Abbott Group, which is seeking to boost investment into DMC after the Vietnamese company announced to open ownership ratio to foreigners to 100 per cent. Therefore, the buying into DMC by stock traders is not unfounded.
Also by widening the ownership room to foreign investors to attract investment, the stock of Thanh Cong Textile Garment Investment Trading Joint Stock Company (TCM) spiralled upward. South Korea’s Eland Group, the largest shareholder at HOSE-listed TCM, intended to raise its stake in TCM after the Vietnamese company opens its foreign room.
In fact, M&A deals are becoming main driving forces to prop up the stock market. If corporate earnings of listed companies are good enough in the second half of 2016, the market will gain more momentum for further robust growth.
Luong Tuan
Vietnamese
