Capital divestment wave creates opportunities in stock market

Capital divestment wave creates opportunities in stock market

Recent announcements concerning state-owned enterprise share sales have sparked a series of positive performances, marking these stocks as bright spots on the trading screens.

Outside the headquarter of Petrosetco in HCM City. — Photo petrosetco.com.vn

As the broader market experiences corrections, stocks related to divestment initiatives are demonstrating notable resilience and even upward momentum.

Recent announcements concerning state-owned enterprise share sales have sparked a series of positive performances, marking these stocks as bright spots on the trading screens.

A prominent example is the stock of Thuong Dinh Footwear JSC (GTD), which has recorded four consecutive days of price increases, reaching VNĐ19,800 per share (US$0.75) on Monday.

This surge follows the announcement by the People's Committee of Hà Nội City regarding the auction of more than 6.38 million shares, representing 68.67 per cent of the company's capital.

Similarly, VTC Telecommunications' stock (VTC) saw a sharp rise, hitting the ceiling price of VNĐ11,800 today. This marked its fourth consecutive day of limit-up trading after Vietnam Post and Telecommunications Group (VNPT) expressed its intent to auction over 2.1 million shares, equating to 46.67 per cent of the company's issued capital.

With a total reserve price of over VNĐ104.1 billion, the auction price suggested a significant premium compared to current trading values.

The positive trend is also evident in the stock of VMG Media JSC (ABC), which soared following VNPT's announcement to sell 5.77 million shares, accounting for 28.3 per cent of the company's equity, at a starting price significantly higher than the current market price.

Another noteworthy instance occurred on November 10, when Petrosetco’s shares (PET) spiked immediately after PetroVietnam revealed plans to auction over 24.9 million shares, representing 23.2 per cent of its charter capital, at a reserve price of VNĐ36,500.

Additionally, the ICT stock of the Joint Stock Company for Telecom and Informatics surged more than 30 per cent within five trading sessions during the first trading week of November, following VNPT's announcement of a major share auction, further highlighting the impact of divestment news on stock performance.

Challenges and risks

Despite the optimism generated by these divestment announcements, caution remains warranted.

The influx of retail investors often drives prices higher, fueled by expectations of strategic investors entering or potential reevaluation of company values. However, risks emerge if auction events are postponed, fail, or fail to attract sufficient investor interest, which can trigger rapid price declines.

Even successfully completed divestment transactions can lead to extended adjustment periods for many stocks, particularly if new owners lack the necessary expertise or if the companies' competitive advantages weaken.

Stocks with substantial state ownership but low liquidity pose another challenge for retail investors, who may struggle to exit positions when market enthusiasm subsides.

The complexities of state divestment processes can also present obstacles, including valuation challenges and selling prices that exceed prevailing market rates, discouraging potential institutional investors.

Generally, while the divestment wave in Việt Nam's stock market presents promising avenues for investors, it is essential to approach this landscape with insight and prudence.

Stocks receiving attention for their divestment potential tend to attract significant trading volumes, often facilitated by larger transaction sizes at above-market prices.

Nevertheless, investors are advised to conduct thorough evaluations of individual companies to identify genuine growth opportunities and ensure informed participation in this dynamic marketplace. 

Bizhub