In this uncertain context money flows into the stock market have turned towards firms with good financial capability, reliable operations and attractive dividend policies.
|Binh Minh Plastic Joint Stock Company (BMP) reported turnover of VND2.27 trillion (US$117.4 million) and net profits of VND257 billion (US$11.17 million), year-on-year increases of 7.7 per cent and 23.4 per cent. Photo vietq.vn|
Plastics companies, many of which have achieved solid results in the first half of the year, are among the biggest beneficiaries of these cash flows.
Binh Minh Plastic Joint Stock Company (BMP) reported turnover of VND2.27 trillion (US$117.4 million) and net profits of VND257 billion (US$11.17 million), year-on-year increases of 7.7 per cent and 23.4 per cent.
Its gross profit margin rose from 22.9 per cent to 26.4 per cent.
BMP expects turnover and profit of VND4.56 trillion ($198.26 million) and VND582 billion ($25.03 million) for the full year.
For Tien Phong Plastic Joint Stock Company (NPT) it reported a sharp increase in gross profit margin from 21.1 per cent to 32.3 per cent though both turnover and after-tax profit decreased. Its net profit margin improved marginally.
Industry insiders attributed the good performance to the decrease in the price of raw materials, which account for over 75 per cent of costs. Thus any fall in raw material prices has a major impact on profit margins.
Polyethylene or polythene (PE) is a commonly used raw material.
The price of PE they import from the US has dropped by 20 per cent since the beginning of the year thanks to the decrease in oil prices caused by the COVID-19 pandemic.
Generous dividend policies have also attracted investors to the shares of plastic firms.
BMP for example paid cash dividends of 50 per cent in 2019, and predicts to pay at least 50 per cent this year.
The company has four plants with a combined capacity of 150,000 tonnes per year.
Last year NTP paid a 20 per cent cash dividends and will keep this rate this year.
Share prices of companies in the sector and trading volumes have been steadily increasing.
On July 31 the price of BMP stood at VND49,100 while trading volume was 84,000. These went up to VND57,000 and 1.8 million on August 24.
Banks busy issuing, buying back bonds
In the first seven months of the year the Bank for Investment and Development of Vietnam took the lead in issuing bonds. It issued VND15.2 trillion worth of them with maturities ranging from six to 15 years.
The bonds make up BIDV’s tier 2 capital, and it can buy them back before maturity one to five years after issuance.
The Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank) has been another big issuer. It recently VND1.5 trillion (US$65.22 million) worth of bonds with a face value of VND100,000 and coupon rate of 8.5 per cent.
The bonds are non-convertible and unsecured and also qualify as tier 2 capital.
Tier 2 refers to a bank's supplementary capital and includes undisclosed reserves, debts and hybrid financial products.
After a total issuance of VND10 trillion was approved in March the bank earlier issued bonds worth VND8.5 trillion. They have a face value of VND1 billion, interest rate of 5.5-5.93 per cent and maturities ranging from two to three years.
VPBank has raised VND7 trillion from bonds with a six-year term and an interest rate of 6.06 per cent.
VietinBank plans to issue long-term bonds worth VND11 trillion this year to increase its tier 2 capital.
According to the Hanoi Stock Exchange (HNX), the total value of corporate bonds issued in the first seven months of the year was VND179.5 trillion. They had maturities averaging 3.97 years.
Credit institutions including banks accounted for VND55.434 trillion, up 32 per cent over the same period last year.
But banks were not only issuing bonds but also buying them back to the tune of dozens of billions of dong before they fell due.
In June and July VPBank bought back bonds worth VND2 trillion issued in 2018 and VND8 billion issued in 2019.
It also plans to call back US$300 million worth of bonds it issued under the Euro Medium Term Note Programme and listed on overseas stock markets.
Since June HDBank has spent VND2.3 trillion to buy back bonds it issued in 2019 and VND500 billion for redeeming 2018 bonds.
The bank’s executive board has revealed plans to redeem more bonds before maturity this year.
The total value of bonds it will buy back this year is expected to be around VND8.52 trillion.
Experts attributed the early redemption to the falling interest rates, which have encouraged the lenders to borrow afresh.
Deposit interest rates have been falling relentlessly since the beginning of the year, widening the gap between them and bond coupon rates to around 4 percentage points.
Analysts at SSI Research said corporate bonds are attracting a considerable amount of investor interest since their yields – or the interest rate as a ratio of the market price of the bonds – are now 0.8-1.7 percentage points higher than the most competitive deposit interest rates.
The coupon rates on bonds issued this year have been lower than last year.
According to the HNX, the average interest rate has been 6.68 per cent this year compared to 7.04 per cent last year.
Besides, experts said banks’ liquidity now is abundant due to the low growth in credit.
The credit growth rate this year has been only 3.45 per cent, less than half the 7.13 per cent achieved in the first seven months last year.
Deposits have grown at 5.31 per cent.
The deposit rates have fallen thanks to the central bank’s cuts in the benchmark interest rates.
In March and May the State Bank of Vietnam cut policy rates twice by a combined 1 – 1.5 percentage points to support economic recovery.
The refinancing interest rate now stands at 4.5 per cent, the rediscount rate at 3 per cent, overnight interest rate at 5.5 per cent, and interest rate on open market operations (OMO) at 3 per cent.
In August the central bank decided to cut its benchmark rates for a third time by 0.2–0.5 percentage points to galvanise the sluggish credit growth.
SSI Research expects a fall of 0.5-0.7 percentage points for deposits of less than 12 months this year, and 0.2-0.3 percentage points for those above 12 months.
Experts approved of banks’ early redemption of bonds in light of the abundant liquidity. VNS
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