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However, to seize this opportunity, investors have to know an enterprise thoroughly to evaluate its real value and possible risks.
Given regulations of the Hochiminh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX), enterprises with a negative after-tax profit in the latest audited financial statement will be put on alert. Therefore, the rule will put around 80 listed enterprises on the two bourses on alert, including those under supervision because they have incurred losses for two years in a row.
A survey of 686 out of 701 listed firms suggested that 80 companies suffered losses in 2011. As of April 13, around 60 companies had been put on alert after their announcement of audited financial statements in 2011, including big names in the real estate and securities sectors such as SJS, SAM, ITC, KBC, QCG, IDJ, SBS, SHS, KLS, VND and HPG.
The result did not surprise investors as enterprises had announced unconsolidated statements earlier. Investors could figure out which companies would be put on the black list as the results before and after auditing are almost the same. As the factor had been reflected in prices before, stock prices of the enterprises have still increased sharply.
The prices of stocks like SJS, QCG, SAM, HTG and ITA rose strongly recently following strong rallies of securities stocks although investors had known that most brokers might have suffered losses.
The black list will be longer in the coming time, including those suddenly incurring losses after their financial statement were audited. Besides, some enterprises will be put on alert for violating information announcement rules or stopping operation while other stocks will be de-listed or put under supervision.
Investment opportunities
The two stock exchanges have applied regulation on alert, supervision or delisting to warn investors of risky stocks. For individual players, the regulations are necessary for them to stay away from risky stocks. For enterprises, this is a warning for leaders to improve their business situation.
However, from another point of view, these risky stocks offer investors a chance to gain big profits. Normally, over-pessimistic investors are likely to dump their bearish stocks, making prices tumble, way below the real value of the companies. Nevertheless, these stocks will make the strongest comeback when the market sees signs of recovery.
In reality, many enterprises in recent time have suffered losses due to provision funds for stockpile, financial investment or forex rate fluctuations, especially securities firms. Most brokers have reported losses after setting up provision funds for the stock market and sharp decline of share prices. However, securities firms’ stocks have rocketed by 100% to 200% compared to earlier this year as the market has seen positive signs. Investors expect that when prices rally again, refunding to the provision funds will help the brokers gain hefty profits.
Real estate stocks are in the same situation. After monetary policies have been loosened and credits for real estate have been excluded from the non-productive loan restrictions, property stocks have surged strongly despite pitiful business results.
Statistics showed that stock prices of 80 loss-making enterprises as of April 17 had surged by 44% compared to earlier this year while the rest stocks rose only 36%. However, to seize this opportunity, investors have to know an enterprise thoroughly to evaluate risks and its real value. In fact, many investors have suffered heavy losses as they tried to make a bet on enterprises already given a warning such as Vien Dong Pharmaceutical Co. (DVD), Bach Tuyet Cotton Co. (BBT), Tribeco (TRI), Basa Co. (BAS), SME Securities Co. (SME) and Cadovimex Seafood Co. (CAD).
Many listed firms will have to go bankrupt given the current situation and investors may leave empty-handed with these stocks. Therefore, stocks given a warning are both big opportunities and risks. To avoid risks, investors should learn about enterprises carefully before making a decision.