Listed companies raise cash reserves

November, 11/2022 - 10:55
Listed companies tend to increase cash reserves amid rising interest rates and difficulties in the market.
A customer deposits money at an office of Vietinbank. — VNA/VNS Photo 

HÀ NỘI — Enterprises in the VN30 group, which includes the 30 largest companies in market capitalisation on the Hồ Chí Minh Stock Exchange (HoSE), have accumulated an additional VNĐ173.3 trillion (US$7 billion) in cash to bring the total amount to nearly VNĐ1.83 quadrillion in the first nine months, according to statistics. 

Specifically, companies operating in the financial industry, including banking, insurance, and securities, increased their cash volume by VNĐ172.8 trillion to VNĐ1.54 quadrillion, while manufacturing enterprises raised their reserves by VNĐ488 billion to VNĐ287.1 billion.

The enterprises’ defensive sentiment is actually understandable amid sharp hikes in interest rates, and challenges in bank credit channels and capital mobilisation through the stock market, whereas investment activities and business expansion carries many risks.

This is partly reflected in the fact that businesses stay out of buying treasury shares at this stage, even though the price-to-earnings ratio (P/E) valuation of the market benchmark VN-Index was at more than 9x, as data from VNDirect Securities Corporation showed, lower than the period when the market hit a bottom due to the impact of the COVID-19 pandemic.

Buying activities of business leaders also happened in a few enterprises, such as Nguyễn Thị Thanh Huỳnh, deputy chairman of the Board of Directors of DIC Corp (HoSE: DIG) registered to buy 20 million shares of DIG, or Mai Trần Thanh Trang, chairman of the Board of Directors of Khang Điền House Trading and Investment JSC (HoSE: KDH) registered to buy ten million shares, and Nguyễn Khải Hoàn, chairman of Khải Hoàn Land Group registered to buy five million shares.

Previously, in March, VNDirect's statistical data estimated that insiders and businesses registered to buy shares with a total value of VNĐ3.5 trillion, with the larger volume recorded in April and May. 

Inadequacies in the Securities Law 2019 were also attributed to businesses' reluctance to purchase treasury shares, according to tinnhanhchungkhoan.vn.

However, it cannot be denied that enterprises and related people prioritise liquidity savings over supporting the price of stocks.

And this is a bigger matter for real estate businesses, due to the negative business cash flow, tight real estate credit, and pressure on bond maturities.

Statistics of nine real estate enterprises pointed out that in the first nine months of the year, the total amount of cash and cash equivalents decreased by more than VNĐ2.5 trillion compared to the beginning of the year, to VNĐ10.7 trillion. 

These nine firms are KDH, Nam Long Investment Corporation (NLG), Sài Gòn Thương Tín Real Estate JSC (SCR), Lideco (NTL), Phát Đạt Real Estate Development JSC (PDR), DIG, Hodeco (HDC), LDG Investment (LDG) and Đất Xanh Group (DXG).

The decline concentrated in DXG which fell VNĐ1.77 trillion to nearly VNĐ1.25 trillion, and DIG which went down by over VNĐ1.67 trillion to VNĐ2.06 trillion.

In addition, all nine real estate businesses posted a negative business cash flow of VNĐ11.5 trillion during the period, compared to the same period's negative VNĐ3 trillion. Of which, DXG recorded a negative of nearly VNĐ3.8 trillion, DIG was negative VNĐ2.38 trillion, KDH was negative VNĐ2.3 trillion, and SCR recorded a negative VNĐ637.6 billion.

To address the cash flow issue in the context of a difficult real estate market and low demand, many real estate investors have announced to lower the selling price by 30 - 50 per cent compared to the beginning of the year in order to collect money. — VNS

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