Will the market’s golden time return?

Many investors do not have the latitude to spend as freely as they did in the past 18 months

Since early 2007, listed and unlisted companies have en masse carried out additional share issuances for paying dividends, mobilising additional capital or converting equity into shares.
This trend is expected to continue throughout the rest of this year and has been resulting in a greater quantity of shares and higher market availability.
The IPOs of 60 state-owned enterprises from June 2007 to March 2008, including big commercial banks, financial institutions and an insurance company, with an estimated capital of VND50 trillion ($3.1 billion), will provide investors with many new stocks and a great quantity of shares.
Stock prices are set according to investors’ assessments and funding levels. To follow are factors which might impact on stock prices in the second half of this year:
l Directive No 03/2007/CT-NHNN dated May 3, which set a 3 per cent cap on loans for stock market investments out of total outstanding loans, has strongly affected investors’ fund availability. Without money from bank loans, investors are getting more cautious about making investment decisions.
l Over the first half of 2007, state budget disbursements stood at only 30 per cent of the state’s target. The tallies for capital from issuing government bonds, and state investment and development credit were 12 per cent and 20 per cent respectively.
Thus, the acceleration in state budget disbursement in the second half of 2007 will narrow banks’ operating capital and could drive up interest rates toward the year’s end. However, a possible higher lending rate will not have much of an impact on listed companies’ profits as earlier mobilisation via additional share issuances on the exchange has considerably reduced their reliance on bank loans.
l The consumer price index (CPI) which rose by 5.2 per cent over the first six months of 2007 and is still on an upward trend and is expected to hit 7.5 per cent by the end of 2007. Inflation will increase both turnover and expenses. Thus, inflation’s impact on enterprises could vary across sectors.
l Assessing a share price for a shareholder/investor could become different from the general corporate assessment. Apart from financial criteria such as growth rates, after tax profits and cash flows. the ultimate question that an investor will ask before purchasing is "how many shares will the company’s equity be divided into?" In general, listed companies could reach an after tax profit and revenue growth rate of 15-20 per cent in 2007. Meanwhile, the number of shares circulated has increased by approximately 30 per cent on average against 2006 via additional issuances.
l The stock market, booming from late 2006 through early 2007, has drawn attention from people in all walks of life and lured indirect investment from the public, corporate firms, commercial banks and foreign investors.
For Vietnam’s stock market to develop sustainably, the government and relevant authorities have made interventions, both direct and indirect, to regulate the market. Thus, a stock market boom with hyper-profit margins witnessed during several months from late 2006 through early 2007 definitely has no chance of returning.