Financial reports in the first quarter of the year highlighted that many enterprises earned profits from financial investment activities but the profits plunged over the same period last year and their investment portfolios were narrower
The second quarter may see enterprises suffer heavy losses in financial investments, especially those which have strongly increased their investments but have yet to make divestments.
Swing trading on the ebb
In the first quarter of the year, the financial revenue of Tasco Joint Stock Company (HUT) reached more than VND126 billion, rocketing by VND124 billion over the same period last year, resulting in an after-tax profit of VND88 billion. The company’s financial revenue in the last quarter of last year also surged to VND218 billion thanks to its transfers of shares, which ended HUT’s losing streak in the six previous consecutive quarters.
SAM Holdings Corporation (SAM) recorded financial revenue of VND47.7 billion last quarter, soaring 139% year-on-year. The revenue saved the corporation from suffering a loss in the quarter. The firm’s financial investments totaled VND1.98 trillion by the end of the first quarter, up 5.6% against early this year. Of the total, the firm has been making short-term investments worth VND276 billion in 15 stocks, namely Alphanam (ALP), Masan (MSN), Dong Nai Plastic (DNP), Hoa Phat (HPG) and Kinh Bac (KBC).
On the local stock exchanges, enterprises such as HUT or SAM are not scarce. They have encountered many difficulties in their core business activities and generated profits from investments in stocks and divestments. The picture has been clearer over the past two years, when production and business activities were stagnant due to the Covid-19 pandemic. Many enterprises have taken advantage of the strong growth of the stock market, used their idle money in swing trading and earned significant profits, contributing to their business results.
Besides HUT and SAM, the Danang Housing Investment Development JSC (NDN), the MHC Joint Stock Company (MHC), the Vinh Hoan Corporation (VHC), the Mekong Fisheries Joint Stock Company (AAM), the Dam Sen Water Park Corporation (DSN), the Thanh Thanh Cong-Bien Hoa JSC (SBT), the Licogi 14 JSC (L14) and the Thaiholdings JSC (THD) can be listed as giants in this field.
However, this trend is likely to end soon due to potential stock market risks. Since early April, the market has experienced the strongest correction in two years, which has wiped off many investors’ profits as a series of accounts faced a call margin and were discharged.
Financial reports in the first quarter of the year showed that many enterprises earned profits from financial investment activities, but profits plunged versus the same period last year and their investment portfolios were narrower.
As a case in point, NDN saw its financial revenue plunge nearly 63% to VND23 billion, while the profit from stock investments was VND14 billion, well below the VND42 billion in the same period last year. The stocks that accounted for the largest proportions of this company’s portfolio were those of the Saigon Hanoi Commercial Joint Stock Bank (SHB), whose original cost was VND199 billion as of March 31, the Vietnam Technological and Commercial Joint Stock Bank (Techcombank-TCB), more than VND97 billion; Vinhomes JSC (VHM), nearly VND79 billion; and Military Commercial Joint Stock Bank (MBBank), more than VND42 billion.
The plunge of bank stocks over the past periods will greatly impact NDN’s portfolio.
MHC also registered a plunge in its financial revenue, at 68%, from VND126 billion to nearly VND40 billion, mainly due to a fall in the profit of financial and stock investments. MHC’s stock investments totaling over VND489 billion currently account for 38% of its asset value, down nearly 20% versus the beginning of the year. MHC has been well-known for not focusing on its core business lines but spending big on the swing trading of other enterprises’ stocks.
Waiting for results in Q2
In the first quarter of the year, the financial reports of enterprises showed that over 520 enterprises recorded a decline in revenue from financial investments compared with the same quarter last year. Some firms reported a sharp fall, such as Viettel Global Investment JSC (VGI) with a fall of nearly VND1.28 trillion, Power Generation Joint Stock Corporation 3 (PGV) with VND358 billion, Thanh Thanh Cong – Bien Hoa JSC (SBT) with VND346 billion, the Vietnam Dairy Products Joint Stock Company (VNM) with VND284 billion, and the Airports Corporation of Vietnam (ACV) with VND239 billion.
Furthermore, enterprises’ investments plunged over the same period last year and early this year. The financial report last quarter of KSFinance Group Joint Stock Company (KSF) revealed that the company’s investment in stocks dropped more than VND445 billion versus early this year; Tin Viet Finance Joint Stock Company (TIN), VND439 billion; HTINVEST JSC (HTP), VND296 billion; F.I.T Group Joint Stock Company (FIT), VND235 billion; Techno – Agricultural Supplying Joint Stock Company (TSC), VND184 billion; Vina2 Invest and Construction Joint Stock Company No. 2 (VC2), VND125 billion; IDICO Corporation – JSC (IDC), VND123 billion; and MHC Joint Stock Company (MHC), VND122 billion.
On the other hand, many other enterprises spent big on stocks or expanded their investment portfolios in the first months of the year. They were Gelex Group Joint Stock Company which revised up its investment in stocks by VND744 billion to nearly VND7.8 trillion. In addition, Bao Long Insurance Corporation registered an increase of over VND700 billion; Gelex Electric Equipment Joint Stock Company (GEE), VND402 billion; Lam Thao Fertilizers and Chemicals JSC (LAS), VND310 billion; Licogi 14 JSC (L14), VND214 billion; and Sai Gon VRG Investment Corporation (SIP), VND212 billion.
In the financial reports in the second quarter, many enterprises may record heavy losses from financial investments, especially those which have strongly raised their investments but have yet to make divestments.
For example, MHC, despite a fall in the investment in stocks, spent VND26.4 billion on POW of PV Power and VND43.8 billion on PXL of Long Son Petroleum Industrial Zone Investment JSC last quarter. With the recent unfavorable developments in the market, it is obvious that MHC has incurred huge losses with these two investments.
The financial reports in the first quarter also showed that enterprises have been making provisions for the devaluation of stocks and the provisions were forecast to increase further in the coming periods. Specifically, FLC Group JSC (FLC) has raised its provision to over VND143 billion by the end of the last quarter; Bao Viet Holdings (BVH), VND65 billion; Saigon 3 Group Investment Development JSC (SGI), VND46 billion; and PVI Holdings (PVI), VND37 billion.
Therefore, enterprises should seek ways to gradually scale down their investment portfolios in the coming time to cut losses. Amid the economic recovery, they need money to expand production and business and increase their investment, not in financial assets like stocks but in new production and business projects and factories. In reality, some enterprises have sold their treasury shares at high prices to mobilize capital for upcoming business activities.
The trend may create a positive impact on the economy as money will flow into production activities but will put pressure on the stock market. Nevertheless, money has poured into the swing trading of stocks over the past two years, and the return of money to production and business activities is indispensable.
In the 2020-2021 period, transactions with VND40-60 trillion each were popular. However, the figure has plummeted to VND20-40 trillion since early this year. This proved that money had been withdrawn from the local stock market, with a large amount being the capital of listed enterprises.
