Local listed companies have set plans to buy back shares for treasury to push up their value and reduce the glut of shares on the market in the doldrums of the stock market and share prices, state media reported.
“The move is very useful for the market at present, due to its unpredictability. The withdrawal will help reduce the number of redundant shares on the exchange where supply outstrips demand,” said Bien Viet Securities Co. analyst Hoang Minh Tuan.
Seafood processor Nam Viet Co. Ltd (ANV) announced it would buy one million shares starting from February 18, one of the largest buybacks so far by a local listed firm.
Other firms, such as Tan Binh Cultural Co (ALT), Material Petroleum JSC (COM), Viet Nam Container Shipping (VSC) and Dai Hung Plastic Co (TPC), have already bought back their shares.
Tuan said that buybacks do not make share prices rise immediately but are effective over a longer period.
Listed firms often buy back shares for treasury when securities prices fall below the real value. Then, they sell out to get profits when the market goes up, Huynh Anh Tuan, SJC Securities Co, noted.
"The buyback is one way to protect business. Their actions will help increase the demand for the market," said Dang Thanh Tam, chairman of Saigon Invest Group.
However, analysts also warned about the positive effects of buybacks. In many cases, share price will continue sliding even after companies have bought back their shares, and reduce the capacity of businesses, said analysts.
Under the Ministry of Finance regulations, firms will use capital reserves or retained earnings for their share repurchase. They are not allowed to carry out buybacks if they are in the process of share issuance or suffering overdue debts and other dilemmas. (Vnexpress, Vietstock, VNA)
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