Treasury stocks stimulates demand

31-Mar-2020 Intellasia | Dien dan Doanh nghiep | 6:02 AM Print This Post

In the past, treasury stocks were rarely used by businesses to increase assets, but now under the pressure of Covid-19, the decision to buy treasury shares has been partly different.

According to VNDirect, from March 9 to 18, 920 billion dong was disbursed to buy treasury shares from businesses and internal shareholders.

According to the list of businesses registered to buy treasury stocks, one thing in common is that most of the share prices of these businesses have significantly evaporated. And the purchase of treasury shares is to support investor sentiment, prevent sell-offs, along with that is also a profitable investment when the market recovers.

Most businesses that registered to buy stocks had good profits last year. For example, PAN, an enterprise associated with the name of Nguyen Duy Hung the most experienced player in Vietnam’s stock market. PAN stock has experienced a decline of nearly 24 percent since the beginning of January to the day this company registered to buy treasury shares. The PAN’s registration to buy 21.6 million shares has reduced the number of outstanding shares and increased shareholder value when this move brought PAN shares to the bottom price of 17,000 dong per share.

According to SSI statistics, as of February 13, 2020, a total of 962 enterprises published their financial statements for the fourth quarter of 2019 (accounting for nearly 95 percent of market capitalisation on three stock markets). In particular, the businesses with black profits and positive profit growth accounted for the majority while only about 101/962 enterprises reported losses. The total profit after tax of enterprises announced in 2019 reached about 303.066 quadrillion dong, up 12.6 percent over the same period. With good profits in 2019, it is clear that many businesses have the resources to cope with the epidemic, risk provisions, and at the same time allocate more sources of treasury stock investment.

The move to buy treasury shares of internal shareholders is also a confirmation of trust in the value of their business in the long term.

Nguyen Quang Thuan, general director of FiinGroup estimated that by March 18, the value of treasury shares that businesses registered or planned to buy would be about 2.277 trillion dong and the management (and related people) also registered to buy about two trillion dong of shares (trading time to mid-April). Enterprises and shareholders are joining hands to regain what was lost. But this registration still creates a strong cash flow.

Similar to the credit and fiscal support packages, the stimulus to buy treasury shares of businesses and internal shareholders in addition to psychological support or small cash flow, has been and needs to be traded in the more realistic way, especially for businesses with surplus capital and appropriate allocation of funds. Businesses must show their trust in the prospects of recovery and their own potential. Moreover, they need to spend money as a special investment at the moment, in order to have the opportunity to help the market reverse.


Category: Stocks, Vietnam

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