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Shareholders quit profit-making firms

Update: August, 11/2012 - 08:18

HA NOI — Instead of pumping money into the companies they invest in with the long-term goal of developing their businesses, many major shareholders are deciding to sell their shares, even when those companies continue to perform well.

Dang Thanh Tam, brother of the chairman of Sai Gon-Quy Nhon Mining Corporation (SQC) Dang Thi Hoang Phuong, suddenly registered to sell his 22 million shares in SQC from August 1-24, only one day after SQC posted a high profit of VND86 billion (US$4.1 million) in the first half of this year, up 162 per cent over the same period of last year.

Tam currently holds 66 million SQC shares, equivalent to 60 per cent of SQC's charter capital. He told the HCM City Stock Exchange that the purpose of the transaction was to restructure his investment portfolio.

At the current price of VND63,000 ($3) a share, if Tam succeeded in selling all of the registered shares, he could get nearly VND1.4 trillion ($66.7 million).

Late in June, the president and several leaders of the furniture maker Duc Long Gia Lai Group (DLG) registered to sell combined shares of around 2 million but most of them sold those shares before the registration time.

In addition, a number of major shareholders (both institutions and individuals) also opted to exit many companies, including food and beverage Thai Hoa Viet Nam Group (THV), property developer Sacomreal (SCR), HCM City Infrastructure Development Co (CII), logistic Gemadept (GMD) and Sai Gon Cable Corp (CSG).

According to market insiders, shareholders in well-performing companies can sell their holdings to gain short-term profits, or to have money to help their businesses.

THV's chairman also explained he sold his shares to procure money to support the company's business.

By the end of the first quarter, Refrigeration Electrical Engineering Corp (REE) also sold over 42 million shares of Sacombank (STB) while Bien Hoa Sugar Co (BHS) sold other 1.44 million STB shares. Those moves were believed to relate to the Sacombank takeover at that time, but many analysts said shareholders also aimed to restructure the companies' investments, as well as supply additional capital for their businesses.

However, the trend of major shareholders selling shares in their companies also raised concerns among other investors about information transparency on the stock market – a quality that makes the market less attractive to investors.

"Major shareholders, as members of a company's boardroom, normally will know inside information before small shareholders. So in many case, it's too late for small shareholders to know negative information and take action as in the case of Vien Dong Pharmaceutical (DVD)," said Phan Dung Khanh, head of the Kim Eng Viet Nam Securities Co's analysis and invesment consulting division.

Meanwhile, punishment for such violations were too light to deter major shareholders, Dung said. — VNS

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