Better, longer growth at fingertips of savvy companies

October 26, 2023 | 14:49
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Streamlined investor relations is becoming indispensable for elevating corporate value in many listed Vietnamese companies, with environmental, social, and governance factors taking centre stage.

In today’s uncertain climate, investor relations (IR) has become instrumental in elevating a corporation’s value, especially as businesses aim for more cost-efficient capital access, according to Mathew Smith, head of Research at Yuanta Securities Vietnam.

Speaking at a seminar on the subject in Ho Chi Minh City in late September, Smith emphasised the significance of strategic communication with stakeholders.

“Through IR, businesses can improve access to funding, achieve more reasonable valuations, and increase their stock liquidity,” Smith noted. “It’s also the means to obtain feedback on corporate strategies and clarify details for investors, ensuring share price stability during crises.”

Better, longer growth at fingertips of savvy companies
Better, longer growth at fingertips of savvy companies, illustration photo/ Source: Shutterstock

The financial market environment has seen bond yields decline for four consecutive decades. However, by 2021, there signs were there that the trend has begun to reverse, with yields rising and central banks like the US Federal Reserve hiking interest rates aggressively. This situation impacts the cost of corporate capital.

“When capital becomes expensive, IR becomes more vital than ever. It’s a time for companies to proactively share their positive news to attract investors. IR activities can help businesses access more affordable capital,” Smith added.

Le Hong Lien, senior director of Investor Relations at Techcombank, also spoke at the event. “The effectiveness of an organisation’s IR activities largely depends on the commitment and consensus of its leadership team,” Lien said.

“Leaders are both the brain and hands of a corporation. Their commitment contributes to half of IR’s efficiency.”

Meanwhile, VietinBank noted that the IR team is enhancing its efforts by collaborating with key stakeholders, including its significant stakeholder, MUFG. Elsewhere, PVTrans’ IR also emphasises sustainability through balancing environmental, social, and governance (ESG) considerations.

A PVTrans spokesperson said, “We’re refining our IR initiatives, aiming for greater transparency and accountability, readying ourselves for prospective foreign capital, especially given Vietnam’s stock market’s anticipated status upgrade.”

In addition, a representative from Hanoi Plastics said, “Throughout our IR endeavours, we’ve faced challenges primarily due to limited channels of information for investors. To address this, the company has expanded its communication channels and remains proactive in correcting any significant misinformation.”

Moreover, it also places a particular emphasis on online channels, given the challenges and its direction towards solutions, the spokesperson concluded.

Nguyen Hoang Linh, research director at Vietcombank Securities Investment Fund Management, added that investment funds highly value businesses that prioritise ESG.

“Companies with good governance and social and environmental responsibility will sustain medium to long-term growth. Environmental standards are becoming increasingly stringent, and Vietnam is considering introducing a carbon credit exchange by 2025. Those unprepared might face increased costs and reduced competitive advantages,” Linh said.

“This ESG momentum, while global, calls for a unified endeavour. Whether individuals or corporations, all hands on deck are essential to shape a sustainable future,” Linh added. “Furthermore, progressing market stature is an enduring journey. We’re optimistic that listed firms will discern the long-term value and intensify their commitment to sustainability.”

Over the past 13 years, the proportion of businesses meeting the information disclosure standards has been on a steady incline. Since 2021, despite the persistent high adherence rate, there has been a discernible plateau. This levelling-off can be attributed to the overarching impacts of the pandemic and significant events experienced by the stock market.

Among all sectors, the securities industry leads in 2023 with the highest proportion of businesses adhering to the disclosure standard. Specifically, 20 out of 25 businesses in this sector achieved the standard, corresponding to a compliance rate of 80 per cent. This percentage considerably surpasses the banking sector, which comes in second at 65 per cent compliance.

Meanwhile, the banking sector maintains its reputable second position with 13 out of 20 businesses performing commendably in information disclosure activities, marking a compliance rate of 65 per cent. This is not surprising, given the sector’s consistent top-tier performance in prior years.

While the insurance industry finds itself at the tail end of the compliance chart, the real estate sector has made significant strides in 2023. Just a year prior, real estate was still languishing at the lower end of the compliance spectrum. However, the tide has turned, with real estate firms significantly enhancing their adherence, positioning themselves mid-table.

A comprehensive survey on information disclosure activities in the stock market this year reveals a somewhat challenging landscape. Out of over 730 businesses, just under 370 failed to meet all the survey criteria.

A notable shift has also been observed in the nature of non-compliance. While in 2022, the main concern was businesses not adhering to the regulations related to annual shareholder meetings, 2023 saw financial statement-related discrepancies taking the forefront. A concerning 160 businesses were reprimanded or penalised for breaches related to information disclosure in the stock market this year.Source: Vietnam Association of Financial Investors

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