Market makes room for small investment funds to take great strides
Market makes room for small investment funds to take great strides
The first half of May has proven to be a golden age for medium- and small-scale foreign investment funds, which have just joined the Vietnamese market.
The share price of FPT, Vietnam’s largest technology group, was VND51,000 on May 7, but had tumbled to VND41,000 by May 13. The blue-chip’s price has dropped by 20 percent, to a level very attractive to investors.
However, big foreign investment funds, which favor spending their money on blue chips, could not buy FPT shares, because the foreign ownership ratio in the company had hit its legal ceiling. And other foreign investors were not inclined to sell their FPT holdings.
ITA of the Tan Tao Industrial Zone Development Corporation is quite a different case. This is really an “open” share. About 7 million shares of ITA were traded in each trading sessions in the last 10 sessions.
The foreign ownership ratio in the company was reportedly at 16 percent as of May 16, which means that there is still plenty of room for foreign investors to jump in and buy ITA.
ITA is also a member of the VN30 – that is, the shares grouped by the Hanoi Stock Exchange after considering the market capitalization value, free-float proportion and liquidity. This means that ITA can also attract ETF (exchange traded funds) as well.
In the first half of May, net sales by foreigners exceeded their purchases in only one trading session, while they bought more than sold in all the other sessions.
The foreign funds which bought ITA on May 13 at its deepest low of VND6,700, could sell the shares to make a profit three days later, at VND7,500 per share.
It is unlikely for closed-end funds operating under the mode of public companies to “surf” on investments to make quick profits this way. However, it is quite feasible for smaller funds which accept risky deals to do this.
The number of foreign funds with some $20 million in capital joining the Vietnamese market has been increasing since late 2013. However, the steady stock price prices in the first quarter of 2014 made it difficult for the funds to make purchases.
Therefore, foreign investment funds sighed with relief when the VN Index recently dropped by 20 percent, with share prices returning to 2013 levels. They believe that now is the right time to buy.
Unlike big investment funds, small funds do not bear any pressure that forces them to sell shares, because it is now the time for them to buy in to fix their portfolios. Therefore, small funds can be daring enough to buy cheap shares and hold the shares for years. Meanwhile, big funds need to be choosier when buying shares because they have to think of restructuring their portfolios and trading shares for profits.
The $100 million funds are considered as big funds in Vietnam. If noting that VND4-5 trillion worth of shares is traded in every trading session, the $100 million funds would be equal to 50 percent of the liquidity. The higher proportion means higher difficulties for the portfolio restructuring.
Most of the small-scale funds in Vietnam are operating under the mode of open-ended funds.
vietnamnet
