Companies with abundant cash have an advantage in the inflation hurdle and a down-trending market.
The US Federal Reserve last week announced a rate rise by 0.75 percentage points – the strongest increase since 1994. Inflation in May rose to the highest level in 41 years, forcing the Fed to act more aggressively than forecast.
In Viet Nam, although the inflation kept stable at 2.64 per cent in April, risks existed as Viet Nam will find it tough to stay out of the global rising inflation trend. Several banks started to increase deposit interest rates.
The rate hike created turmoil for the global financial market, including Viet Nam, with the VN-Index dropping by dozens of per cent in just over a month, with many stocks falling by 40-60 per cent.
According to Mirae Asset, many companies saw their capitalisation decrease to close to their assets in cash, which is considered safe among the ups and downs.
Updates from Fiinpro showed that Vietnam LPG Trading Joint Stock Company (PVG) had the largest net cash ratio, about VND690 billion, equivalent to more than 218 per cent of the company’s capitalisation.
Hoang Huy Financial Services Investment (TCH) had a net cash value of VND7.8 trillion or 97.5 per cent of its capitalisation. Conteccons Construction (CTD) ranked third with a net cash value of nearly VND3 trillion or 94 per cent of its capitalisation.
Many companies operating in the manufacturing industry saw good cash flow in the first quarter of this year, such as Petroleum Technical Services Corporation (PVS), PV Oil (OIL), Petro Viet Nam Ca Mau Fertiliser (DCM) and Dong Phu Rubber (DPR).
Insurance stocks were also expected to benefit from rising rates as these companies mainly invest in bonds and deposits at banks, with a modest proportion invested in stocks and real estate.
Companies with a high proportion of cash were BIDV Insurance Corporation (BIC), Agriculture Bank Insurance Joint Stock Corporation (ABI) and Bao Viet Insurance (BVH).
Insurance stocks will also benefit from the plans of State capital divestment and increasing foreign ownership as well as the economic recovery in the second half of this year, which will help increase premium revenue.
According to Rong Viet Securities, shares of industrial zone companies will also benefit from the development of e-commerce and the foreign direct investment inflow into Viet Nam.
SSI Research said that companies with available land for lease would have more advantages thanks to the increase in leasing prices of around 8-20 per cent in industrial zones such as Chau Duc, Phu My, Bau Bang and Yen Phong. — VNS