Businesses fail in securities investment

Friday, May 9, 2008
In the difficult period of the stock market at the moment, not only many small investors but also financial institutions, investment funds and banks now have a big headache of big losses in securities business.

During 2006-2007, a slew of banks, funds and financial institutions considered corporate shares to be sure gain for the future. Even a lot of strategic partners gained agreements to buy back corporate shares at a price much lower than the trading price and listing price. But since March 2008, these strategic partners have been very surprised at unexpected losses due to a quick slump in share prices.

By the end of 2007, Tan Tao Industrial Zone Joint Stock Co (coded ITA) offered to sell 20 million shares to strategic partners with the lowest price of 85,000 dong per share. On May 5, ITA share price remained at 73,000 dong each and if strategic partners buy all shares, the loss will be 240 billion dong.

Seemly, ITA's strategic partners are still luckier than Vietnam Eximbank's 17 strategic partners who earlier purchased 500 billion dong of the bank's chartered capital at a price higher eight times over par value meaning that the total value of share sales reached four trillion dong. At present, the bank share stands at 50% of the par value and it is easy to see a loss of up to two trillion dong.

Many financial institutions and foreign banks perhaps now felt relief after the deny of taking Vietcombank's shares at an average price of 108,000 dong per share by the last year end. If not, with the current price of 50,000 dong per share, they [financial institutions and foreign banks] could loss at least a half of their investment capital spent on the share.

Listed firm Refrigerating and Electrical Engineering Shareholding Co (REE) previously earned a profit of hundreds of billions of dong a year thanks to securities investment, but during the first quarter of 2008, it announced a loss of over 100 billion dong in the field.

Not only domestic strategic investors but also foreign investors are not exception in the stock market slump. Two investment funds including Vietnam Dragon Fund Limited and Vietnam Opportunity Fund last May bought 1.2 million DMC coded shares of Medical Import Export Joint Stock Co at 130,000 dong per share. Based on the market price of the share code on May 5, 2008, two funds lost more than 100 billion dong.

Similarly, the US' Chip Eng Seng and Citadel Investment Fund�Hong Kong Branch who took one million HBC coded shares of Hoa Binh Real Estate Construction and Trading Joint Stock Corp now also are suffering a big loss of 250 billion dong. As estimated, over two trillion dong of investment funds was evaporated on the stock market.

Even the majority of thousands of billions of dong in banks' achieved profit that was earned from securities self-trading in 2006-2007 was poured into securities business and now these banks are under the heavy pressure caused by the slide of the stock market.

Leading among commercial banks in terms of total capital amount pumped into securities investment is ACB with 9.636 trillion dong, followed by VIBank 6.676 trillion dong, Techcombank 6.842 trillion dong, South-eastern Asia Commercial Bank (SeABank) 3.968 trillion dong, ABBank nearly 3.6 trillion dong, Maritime Bank 2.169 trillion dong and VPBank with 1.678 trillion dong.

Currently, a lot of banks raced to offload mortgaged shares of investors and their shares, due to this State Bank of Vietnam was forced to propose banks to stop offloading of mortgaged shares.

Securities analyst Tran Ngoc Nam assessed, by the middle of 2007, the stock market was frozen and expected to rally between the end of 2007 and the start of 2008. Due to the predication, many banks poured a huge capital into securities investment. And now most of them see big losses.

According to the economist Nguyen Quang Hung, losses from banks' financial investment have not been revealed yet thanks to the recent interest rate fever. Moreover, in these lenders' financial report, they only publicised "nice figures" without detailed results from the business field. (Tien Phong)