+ Directive 03/2007/CT-NHNN on controlling outstanding credit balance for securities mortgage loans at 3% of total outstanding credit balance of the Bank.
+ More than 90% of listed companies on the stock exchange issue additional shares. The supply of goods is abundant, especially the very large IPOs, due to the equitization of corporations such as Bao Viet, PVFC, Vietcombank.
+ Unfavorable information such as high domestic inflation rate, high and volatile gold price, falling world stock market, income tax on stock investors (20%) also affect investor psychology.
- The stock market plummeted after a period of overheating.
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The Vietnamese stock market is currently on a downward trend. In 2007, the Vietnamese stock market grew by only 25%. Since its peak in March 2007, the stock market has declined significantly and new record lows have been set. The reasons are that banks have tightened lending to buy stocks, too many new stocks have been released to the market, especially mortgaged stocks, and concerns about the global economic downturn. Some experts believe that the current free fall of the market is partly due to the State Bank withdrawing 20,000 billion from the financial system through the issuance of mandatory treasury bills to joint stock commercial banks. The scarcity of VND in recent times has also made it difficult for foreign investors to buy stocks.
In April 2008, the Vn-Index only increased by 1%, the trading volume decreased, averaging only 21 million USD/day, less than 1/3 compared to 2007. The capital of small investors has recently shifted to gold - a new means of speculative accumulation. However, foreign investors still show positive signs with the market. At the same time, in general, the profit growth rate of companies in this period is quite good, experts said.
Experts believe that the Vietnamese stock market is gradually returning to its true value.
The real estate market is down.
2007 is considered a vibrant year for the Vietnamese economy. The key markets, which concentrate many resources and attract public attention, are real estate, capital and currency. Many signs showing strong connections between these markets are recorded from actual operations and economic events. The interaction between the real estate and stock markets is almost a constant concern of individuals whenever potential is improved or when it is necessary to rearrange the structure of assets held. This characteristic is even more evident when the Vietnamese economy has positive steps forward, and people's accumulated wealth is greater. The 90s of the last century recorded that society viewed real estate as a means of storing value alongside gold and strong foreign currencies (commonly USD). The trend of increasing real estate prices is the driving force that makes this market increasingly vibrant and overwhelms traditional forms of investment and savings.
After the stock market peaked (specifically, the Vn-Index reached
1,170.67 points on March 12, 2007) has been continuously fluctuating, the real estate trend has become clear, with prices getting higher and higher. Real estate business activities are very bustling, not only among real estate investors and speculators, but also all financial providers such as investment funds, commercial banks and equity investment enterprises. The first quarter of 2007 recorded a sharp increase in real estate demand from successful investors in securities activities. The amount of cash received from stock investments not only contributed to increasing the volume of real estate transactions but also created very high liquidity for this market. Perhaps that was the most direct reason leading to the real estate fever during the remaining period of 2007.
The skyrocketing real estate prices in the second quarter of 2007 had a psychological impact that was clearly reflected in the rush to enter the real estate market. Those who really needed to use the property tried to find and own a property that suited their wishes and financial capabilities before the price escalated. Another group, accounting for 50-60% of real estate buyers, quickly made speculative transactions to wait for the price to increase. The decline in the stock market since April 2007 partly forced the public to adjust their investment profit expectations and reconsider their financial potential, considering one of two options: real estate or stocks. By the beginning of the third quarter, real estate prices had stabilized.
The tightening of credit and the inflation situation in 2008 are closely related to the real estate market. The consumer price index in 2008 increased sharply compared to 2007, estimated at over 20% compared to the same period in 2007. Meanwhile, construction costs increased by 15%, causing some projects to not be completed on schedule. The slowdown of the real estate market in early 2008 has caused land prices to decrease in the recent period. These are also the reasons why many real estate investment enterprises have to give up or temporarily suspend projects to pursue more profitable investment activities.
New policies to control the financial and monetary markets are fraught with uncertainty.
Faced with the situation of rapidly increasing inflation in 2007 and 2008, a series of administrative measures were used in a lax manner, such as applying ceiling interest rates on deposits, compulsory credit notes, etc., causing a decrease in liquidity in banks. The money supply to banks did not increase as expected in early 2008. In that situation, withdrawing money through compulsory bonds with low interest rates was an untimely action that created a much worse psychological effect on liquidity. Especially in the context of difficult banking operations, having to carry 20,000 billion VND with interest rates.
Low interest rates reduce banks' profitability and financial capacity and damage their image in the eyes of investors.
These effects, combined with the dysfunctional operation of the interbank system through the SBV's lending through auctions with interest rates up to 30%/year and its limited operation as a lender of last resort, have created a mentality of a liquidity crisis within the commercial banking system. This has led to the emergence of a mentality of "reserve" above the necessary level in strong banks and increased the thirst for capital of many banks.
Psychological effects play an important role in market economies, especially in developing countries. The application of a ceiling deposit interest rate of 12% while the lending interest rate is up to 20% has made depositors not dare to deposit money, and borrowers have to borrow at high prices. This problem reduces the transmission mechanism to fight inflation, because when interest rates increase, the increase in the value of that capital must reach savers, thereby increasing the psychology of saving, reducing spending and reducing demand, curbing inflation. However, maintaining a ceiling deposit interest rate has made the increased value of capital not reach savers, resulting in a decrease in savings capital into the banking system.
2.5.2 Subjective factors
During this period, many enterprises operating in the textile and garment industry (Thanh Cong TCM textile and garment company, Phong Phu textile corporation, Hanoi garment corporation, Viet Tien garment corporation...), enterprises in the food industry (such as Kinh Do KDC, Tribeco TRI...) all set their goal to become multi-industry corporations, so in a short time, enterprises have boldly shifted their investment to new areas, such as real estate, financial investment, trade and services, while their capacity is limited, and resources are not enough to meet the demand.
changes so rapidly: such as human resources, corporate structure, and supporting information systems.
The system of processes and data has not been standardized, and there is no connection between departments participating in investment activities. For example, matching data between departments and divisions in the enterprise is still difficult because it has not been standardized, the investment process has not been fully implemented, and has not been updated according to new investment regulations.
Market research and forecasting activities, analysis and evaluation of activities are not carried out regularly. Therefore, portfolio management is still lacking and has not brought high results.
The organizational structure of some enterprises is still simple and does not keep up with the scale of capital management and requirements. Professionalism in investment activities is still low, many enterprises have not really invested properly in financial investment activities such as lack of initiative in finding investment projects, so they only focus mainly on bank deposits, other credit institutions, or on stocks without exploring real estate investment projects, or financial investment channels abroad.
Investment business processes have not been implemented according to any standards, so operations are not agile enough to react quickly to market changes.
In summary, Chapter II has analyzed and evaluated the current situation of financial investment activities in some typical enterprises in many different fields and drawn conclusions with issues that need to be solved. Based on the analysis of limitations and subjective and objective causes, Chapter III will provide specific solutions to improve the efficiency of financial investment activities of Vietnamese enterprises.
CHAPTER III. SOLUTIONS TO IMPROVE THE EFFICIENCY OF FINANCIAL INVESTMENT ACTIVITIES
VIETNAMESE ENTERPRISES
In order to improve the efficiency of financial investment activities of enterprises, Chapter III of this thesis will focus on two main groups of solutions: some recommendations for the state and solutions for enterprises to improve the efficiency of capital use for financial investment.
I. SOLUTIONS FOR BUSINESSES.
In addition to developing scale, enterprises need to improve the quality of investment activities. Figuratively speaking, the efficiency of investment activities is like the product of the quantity factor and the coefficient. Even if the quantity factor - investment scale is large but the coefficient - investment quality is low, the efficiency is still poor. Therefore, improving the quality of investment efficiency also needs to be seriously considered and researched, not simply to increase the scale of investment revenue. The following section will provide some specific solutions as follows:
1. Determine appropriate investment direction
The recent development of the global financial market in general and the domestic financial market in particular has posed many challenges to all businesses, regardless of the field they operate in. The overheating of the domestic financial market in the period of 2006-late 2007 has caused businesses to follow the trend of financial investment to make large profits quickly, but it also poses great risks in the future. Businesses have taken advantage of surplus capital from issuing shares to increase charter capital, or capital from ineffective business activities for financial investment, creating a source of working capital.
transfer in the economy effectively, increasing the profitability for the enterprise itself. However, the question here is, what field to invest in? And how to invest effectively is a problem that few enterprises consider before making widespread investments like today.
Therefore, the orientation of financial investment is very important. Depending on the type of business that is operating in production and business, financial investment activities should be promoted in a safe and effective direction. The loss of financial investment enterprises in 2008 does not mean that financial investment will be out of date, but it is a lesson for enterprises to have a reasonable investment direction and participate in any field that needs to be professional in that field.
Before implementing financial investment processes (as described in section 2 of this part), enterprises need to consider and analyze their main business activities, balance capital sources for production and business activities and financial investment activities, perspectives on risk tolerance, tax regulations, etc. Then, from the overall financial situation of the enterprise, including current and future needs, and the capabilities of the enterprise itself, it is necessary to systematically determine investment purposes and investment orientations.
Each enterprise in each stage must determine for itself immediate and long-term goals for financial investment activities. These goals must be closely linked to objective and subjective factors. Objective factors here are market fluctuations, market demand, which industry will give good profits in the future... Subjective factors: financial situation, capital allocation structure, management capacity, employee capacity in the company...
For example: Manufacturing enterprises with small capital should focus on their main production and business activities, in order to expand and develop their business.
In business, we should not invest in many other fields while our capacity is weak in all aspects. Or in business and production enterprises that are strong, have large capital surplus, financial investment activities are necessary, but we need to have the right investment orientation: long-term or short-term investment, which business sectors to invest in, should we expand to completely new fields?
Through the development of investment activities of production and business enterprises in recent times, the effectiveness of investment activities still contains many risks. The lesson for enterprises is to consider financial investment in areas close to the company's main activities, expanding investment to other areas that require investment in all aspects from management, human resources, information systems... to operate professionally, limit risks, and grow steadily.
2. Completing the organization of financial investment activities:
In terms of organizational structure : To overcome the limitations of the organizational structure and to develop investment activities, it is necessary to continue to maintain the concentration at the Head Office, in addition to continuing to promote the establishment of companies, departments... to manage funds and provide financial investment consulting. The activities of the company or department will manage and invest the idle capital of the corporation, thus taking responsibility as well as enjoying benefits depending on the investment results.
In terms of human resources: Financial investment is an activity that requires high professionalism, so the quality of management and operation of investment activities of companies depends largely on the professional qualifications of the staff, especially the managers. Enterprises need to build a team of energetic, enthusiastic, professional and foreign staff, knowledgeable in the fields of investment economics, international laws and practices on investment activities. The current organizational model of enterprises is mostly young, newly graduated staff without much experience in investment activities, so developing an investment team