Vietnam’s cash-rich firms more resilient in coronavirus crisis

CASH-RICH companies in Vietnam are in much better shape to weather market crises amid the impact of the Covid19 pandemic than their peers on the stock market, said VNDirect Securities Corp ( VNDS).

“The Covid-19 pandemic has not only caused a global disruption but also threatened to bring about a worldwide economic recession,” VNDS said in a recent report.

Investments in companies with strong finances help safeguard returns during market crises because businesses with ample cash will be better able to cope with challenges and recover faster than others, VNDS said.

“At this time, the Covid-19 pandemic acts like a natural selection process, opening up new business opportunities, especially for businesses with strong financial capacity to gain market share, leaving their opponents far behind,” said VNDS.

VNDS has filtered out businesses with abundant cash balances to help investors determine the stocks with high investment potential.

To classify businesses, the VNDS applied a filtering method to all 1,023 stocks on the three floors of the Ho Chi Minh Stock Exchange (HoSe) and the Hanoi Stock Exchange (HNX) and its Unlisted Public

Company Market (UPCoM), excluding companies in banking, insurance and securities.

Under VNDS’s filtering method, a cash-rich company has average weekly liquidity, or matched volume, of more than 10,000 shares, market capitalisation of over 200 billion dong ($8.6 million), net cash/market capitalisation ratio of more than 50 per cent and debt/ equity ratio lower than 1.

Based on the filtered list, VNDS expects recovery from oil and gas stocks such as Petrovietnam Fertilizer & Chemicals Corporation (DPM), PetroVietnam Technical Services Corporation (PVS), PetroVietnam Oil Corporation (OIL) and PetroVietNam Low Pressure Gas Distribution JSC (PGD).

The industrial real estate and logistics stock groups are also expected to recover faster than other sectors thanks to the movement of capital from China to Vietnam and free trade agreements involving Vietnam.

Meanwhile, the construction industry, especially the civil construction sector, is not tipped for success due to the gloomy real estate market this year.

Despite rising demand for housing, the postponement of project licensing and capital pressure will weigh on real estate developers in the postdisease period, said VNDS.