Manipulation of share price

With many falls over the last month, FTM (Duc Quan JSC) has given many investors’ huge losses. However, it is not a rare case to see companies like FTM fall in the Vietnam stock market.

Illustrative photo.

Illustrative photo.

Share price tumbles

The fall in FTM started on 15 August when its share price fluctuated around VND 24,000/share. However, on 12 September, the share price of FTM was only VND 5,000/share, posting 20 consecutive sections to fall to down limit. Notably, there were no buyers on these trading days while the sellers were huge including investors and brokerage companies who were forced to sell on client’s account because of margin requirement.

FTM has fallen for a month, but the management only spoke to investors on 10 September. According to Nguyen Hoang Giang, Chairman of FTM, some articles had delivered wrong messages about FTM. This wrong information impacted the image of the company and sentiment of investors strongly.

However, market did not seem to accept the explanation of the management. The falling share price was partly due to bad operating performance of FTM.

According to financial statements in 6M/2019, FTM’s revenue and profits were at VND 459bn (-24% YoY) and VND 31bn, respectively. The bad performance was caused by the escalation of the on-going US-China trade war. US has imposed 25% tax on USD 250bn value of Chinese products, including fabrics. This policy of US has directly impacted the fabric sector in Vietnam, including FTM, as 70% of Vietnam’s fabric is exported to China. Furthermore, the export value was also badly impacted by the depreciation of CNY.

FTM not a rare case

Before FTM, investors had seen many similar cases, such as CDO. At the end of 2017, the State Securities Commission received the decision of Ha Noi’s Public Security Office for suing the manipulating activities on the share price of CDO.

After this decision, CDO share price fell continuously to the floor, from VND 35,000/share to VND 3,000/share.

Later, CDO was added to the restricted list of HOSE, and postponed trading activities because of violation of rule of information disclosure.

There is no general rule to help investors avoid manipulating of stocks. Hence, investors have to protect themselves by improving their knowledge and skills on cash flow management. Investors must control their greed and should not think that they are the smartest investors in the market.
Currently CDO is allowed to trade again on UpCOM, but the stock is still a nightmare for many investors. CDO is trading at VND 900/share.

The other stocks which had the same status is YEG and SJF. YEG’s share price after being pushed up to VND 343,000/share on 28 June 2018 had fallen to VND 50,000/share. SJF dropped from VND 28,000/share on 24 August 2018 to VND 2,400/share currently, a drop of 90%.

Trading techniques

According to Phan Dung Khanh, Investment Consulting Director, Maybank Kim Eng Securities, some signs to recognize manipulating activities, including significant share price surge are if company’s performance is not good; company posts many projects to draw a bright future; majority of shares are in hands of some people; and if there is in-fighting within the management.

If investors bought these stocks, best way is placing the stop loss order. If share price falls to the limit, shares of these stocks will be automatically sold out.

According to Khanh, the State Securities Commission should audit, control the quality of financial statements of listed companies, and companies which are going to list to avoid the information distortion from the financial statements.

The Stock Exchanges should have some solutions to alert investors of some doubtful stocks which have sudden share price growth, big trading volume, or wrong information related to performance of companies.

The State Securities Commission should have strict penalties to punish the companies which violate the rules of the market, not just by applying financial punishment like we are doing now.

Kim Giang

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