Investors find ways to trade buy rights

HA NOI — More companies are seeking to raise capital through the stock market, but one of the factors limiting the success of share issues is the need to guarantee liquidity, e.g., through rights to purchase and other derivative products.

In Quoc Cuong Gia Lai Co's (QCG) recent issue of additional shares, shareholders declined their rights to buy at least 9,000 shares at a price of just VND15,000 ($0.75), while the market price for QCG shares was around VND30,000 ($1.50).

Over 4.6 million shares of Viet Nam Electricity Construction Co (VNE) were also declined by existing shareholders in August.

Buy rights could be traded as derivative products but, due to their lack of tradeability on the Vietnamese stock market, such transactions must be negotiated one by one.

In October, for instance, Vietinbank (CTG) offered additional shares to existing shareholders at a preferential price, but over 357,000 shares were declined. These shares later were sold to the bank's labour union at a price of VND10,000 ($0.50) per share.

Individual investors generally have no opportunity to participate in derivatives, as the privilege of bidding on them is typically extended to large institutional investors.

"Individual investors can only buy odd lots. Investors only know how many shares are unsold at the end of the issue, but the company will usually sell those shares to institutional investors," said Nguyen Quang Thu, a HCM City-based investor.

Demand for buy rights was nevertheless high as the prices offered to existing shareholders were usually lower than the market prices, Thu said.

To meet the rising demand, the website quyenmua.com provides information on stock buy rights. Investors can post information of buy or sell rights on the website.

"In the long run, these products will attract many investors as more and more listed companies plan to issue shares," said Le Thi Thanh Van, director of Truong Xuan Technology Development and Real Estate Joint Stock Co, which manages the website.

The total value of share issues approved by the State Securities Commission was over VND45.5 trillion (US$2.3 billion) as of November 23, according to the commission.

Source: vnagency.com.vn