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Holding tight may result in long-term profits for investors
The recent sell-off of Vietnamese stocks by several foreign fund managers has caused panic among domestic investors in view of a possible liquidation in 2012. Among these foreign investors, Korea Investment Trust Management (KITM) and TongYang were said to be under liquidation pressures.
Like many other fund managers, KITM and TongYang bought heavily during the market peak of 2006-2007 [with assets value reached over $1 billion], but 2012 would be a challenging time for the market.
A KITM source said its managers reached agreement with shareholders to change into an open-end fund. Months ago, KITM managers persuaded shareholders in Korea that the fund’s liquidation would not be in their best interest.
Therefore, six funds worth $400 million managed by KITM will stay in Vietnam and like KITM, TongYang will change into an open-end fund. However, as the markets continued to fall to new lows, foreign investors kept selling, concerning investors. “This is mostly technical market timing activities of institutional investors for the most part,” said Juerg Vontobel, Vietnam Holding’s founder.
Vontobel said that when fund managers thought the market would fall further, they would sell stocks to hold cash. A foreign fund manager added that if the stock market continued to be low, the fund liquidation pressures would be high.
“In the worst case [of liquidation], fund managers still have a period of time to do it and in order to avoid losses, liquidation will be made only in a way that maximises the liquidation returns for the investors,” said the fund manager.
Negative sentiments dominated Vietnam’s stock markets now, but a London-based fund manager said the domestic market was at the crossroads and if the domestic currency stabilised, the economy would recover strongly in 2012.
“Risks remain when investing in Vietnam, but we believe in its investment potential,” the London-based fund manager said in a note sent to shareholders.
“The tightening policy was a bitter medicine, but necessary to control inflation,” said Vontobel. He believed inflation fight would be successful and mid 2012 a loosened monetary policy was expected, which would help the stock market’s recovery.
In a related development, a VIR source said Denmark-based BankInvest had successfully mobilised around $100 million to buy unlisted stocks.