Pocket Option: What are treasury shares and their impact on Vietnamese investors
The Vietnamese stock market is developing rapidly, requiring investors to master important concepts. Treasury shares are one of the relatively new financial instruments in Vietnam but have a strong impact on share value and investment strategy. This article provides an in-depth analysis of treasury shares in the context of the Vietnamese market and provides practical strategies for investors.
What are treasury shares? Definition and basic characteristics in the Vietnamese market
What are treasury shares? This is a question many Vietnamese investors often ask when learning about the stock market. Simply put, treasury shares are shares that have been issued and subsequently repurchased by the issuing company from the market. After repurchase, these shares are not canceled but are held by the company for other strategic purposes in the future.
In Vietnam, the activity of repurchasing shares as treasury stock has become particularly popular from 2020 to the present, when many large enterprises such as Vingroup, FPT, and Masan recognized that their stock prices were undervalued compared to their intrinsic value. According to data from the Ho Chi Minh City Stock Exchange (HOSE), the total value of treasury shares of listed companies increased by 27% in 2023 compared to the previous year.
Treasury shares are a special type of stock with important characteristics that Vietnamese investors need to understand clearly:
- No voting rights at annual or extraordinary shareholder meetings
- No right to receive cash or stock dividends
- Not counted in the number of outstanding shares when calculating financial ratios
- Can be reissued to investors or distributed to employees through ESOP programs
- Directly affects important financial indicators such as EPS (Earnings Per Share) and ROE (Return on Equity)
When a company decides to repurchase its own shares, the number of shares circulating in the market will decrease. This creates a positive effect on the company's value and the interests of existing shareholders, especially in conditions where the Vietnamese stock market is still experiencing many fluctuations and is not truly efficient in valuing businesses.
Why Vietnamese businesses repurchase shares as treasury stock
Why are Vietnamese companies increasingly interested in repurchasing their own shares? The reasons lie not only in purely financial aspects but also relate to long-term development strategy and the specific competitive context of the Vietnamese market.
| Reason | Detailed Description | Real Examples in Vietnam |
|---|---|---|
| Enhance EPS | Reduce the number of outstanding shares, increase earnings per share, making the stock more attractive | FPT repurchased 2.56 million treasury shares in Q2/2023, EPS increased by 8.2% afterward |
| Support stock price | Create additional demand when the stock price is undervalued, prevent excessive decline | Vinamilk (VNM) purchased 22.9 million shares as treasury stock in 2022-2023, price stabilized afterward |
| Prevent takeovers | Reduce the number of shares on the market, making unwanted takeovers more difficult | Many businesses such as REE, Hoa Phat apply this strategy in the context of market opening for foreign investors |
| Distribute to employees | Use as bonus shares or ESOP to attract and retain talent | Masan Group and Techcombank used treasury shares for large-scale ESOP programs in 2023 |
| Capital restructuring | Optimize capital structure, balance between equity and debt | Vingroup (VIC) purchased 10 million treasury shares in 2022 during the group's restructuring process |
Notably, in the context of Vietnam's macroeconomic challenges in 2022-2023, many large companies such as Vinamilk (VNM), FPT, and Masan Group implemented large-scale share repurchase programs. Vinamilk spent about 2,500 billion VND to repurchase shares, while FPT bought back more than 3 million treasury shares with a value exceeding 300 billion VND. These moves not only helped stabilize share prices but also sent a strong signal about leadership's confidence in the company's long-term prospects.
The process of repurchasing shares as treasury stock in Vietnam
To repurchase shares as treasury stock, Vietnamese companies must follow a strict process according to Decree 155/2020/ND-CP and Circular 96/2020/TT-BTC of the Ministry of Finance. Understanding this process helps investors recognize transparency in companies' share repurchase activities.
Steps to implement treasury share repurchase in Vietnam
- Step 1: The Board of Directors meets and proposes a detailed share repurchase plan
- Step 2: The General Meeting of Shareholders approves the resolution on repurchase (or BOD decides if less than 10% of outstanding shares)
- Step 3: Disclosure of information about the repurchase plan at least 20 days before the first trading day
- Step 4: Submit registration documents for share repurchase to the State Securities Commission and wait for feedback
- Step 5: Execute the purchase transaction within a maximum period of 30 days from the start date
- Step 6: Report transaction results within 10 days after completion
According to current regulations, Vietnamese companies are only allowed to repurchase a maximum of 30% of the total issued shares (previously 25%). The repurchase must be conducted publicly through the stock exchange (through order matching or negotiation), absolutely not allowed outside the exchange to ensure transparency.
Pocket Option provides Vietnamese investors with an exclusive "Treasury Stock Alert" tool that helps track real-time information about treasury share repurchase activities of more than 1,500 listed companies. Investors can set up automatic alerts when large companies announce repurchase plans, helping to capture investment opportunities before the market fully reacts. Pocket Option also provides in-depth analytical reports on the impact of treasury share repurchase programs on stock prices in the Vietnamese market.
Impact of treasury shares on financial indicators of Vietnamese businesses
Treasury shares directly affect many important financial indicators of businesses. For Vietnamese investors, understanding these impacts helps more accurately assess the true value of businesses, especially in a market with many information asymmetries like Vietnam.
| Indicator | Impact of Treasury Shares | Examples from Vietnamese Businesses |
|---|---|---|
| EPS (Earnings Per Share) | Increases when the number of outstanding shares decreases, even if profits remain unchanged | MWG repurchased 2.35 million treasury shares in 2022, Q4/2022 EPS increased by 4.7% despite slightly decreased profits |
| P/E (Price-to-Earnings) | Decreases when EPS increases (if price remains unchanged), making the stock appear "cheaper" | FPT after the share repurchase program in 2023 had P/E decrease from 18.5 to 17.2 |
| ROE (Return on Equity) | Increases when equity decreases due to share repurchase | Vinamilk (VNM) recorded ROE increase from 25.8% to 27.3% after the 2023 share repurchase |
| Book Value per Share | Changes depending on the repurchase price compared to the current book value | PNJ repurchased shares at a price 15% higher than book value, slightly decreasing BVPS |
| Dividend Yield | Increases when total dividends remain unchanged but the number of shares receiving dividends decreases | REE increased dividend yield from 3.8% to 4.2% after the 2023 repurchase program |
Many Vietnamese investors often wonder: "Do treasury shares receive dividends?" The answer is absolutely no. Treasury shares do not receive any dividends, whether cash or stock. This creates an advantage for existing shareholders - when the total number of shares entitled to dividends decreases, companies can increase the dividend payout ratio per share without increasing total costs.
Real-world example of treasury share impact in Vietnam
To better understand, let's look at the case of Vinhomes Joint Stock Company (VHM) in 2023. VHM had 4.35 billion outstanding shares, with a net profit after tax of 29,000 billion VND, equivalent to an EPS of 6,667 VND/share. The company repurchased 300 million shares as treasury stock, reducing the number of outstanding shares to 4.05 billion. With unchanged profits, the new EPS increased to 7,160 VND/share, a 7.4% increase. This contributed to increasing the attractiveness of VHM shares in the market, even in the context of the real estate industry facing many difficulties.
Pocket Option provides a unique "EPS Impact Calculator" tool that helps Vietnamese investors easily calculate the potential impact of treasury share repurchase programs on the EPS and other financial indicators of businesses. This tool is particularly useful when evaluating investment opportunities in companies that have just announced share repurchase plans.
Treasury shares and their relationship with the Vietnamese stock market
In the Vietnamese stock market, what are treasury shares and share repurchase activities have become an important indicator of business sentiment and direction. This trend has become increasingly clear, especially during periods of strong market fluctuations such as the 2020-2023 cycle.
| Market Phase | Treasury Share Repurchase Trend in Vietnam | Significance for Investment Strategy |
|---|---|---|
| Sharp market decline (VN-Index -30%) | 72% of large companies (Top 50) implemented or announced repurchase plans | Strong buy signal - leadership believes price is below intrinsic value |
| Sideways market (VN-Index ±10%) | 35% of companies conducted selective repurchases, usually financially strong businesses | Selective investment opportunities in high-quality businesses |
| Strong market rally (VN-Index +25%) | Only 15% of companies repurchased, 22% of companies sold treasury shares to raise capital | Caution warning - leadership may believe shares are highly valued |
Data from the Ho Chi Minh City Stock Exchange shows that during the period when VN-Index fell sharply from April 2022 to November 2022 (dropping nearly 40%), 78 listed companies implemented share repurchases with a total value of up to 12,500 billion VND. Large enterprises such as Vingroup (VIC), Vinhomes (VHM), FPT, MWG, and Hoa Phat (HPG) all actively implemented large-scale repurchase programs. Notably, after these programs were completed, the stock prices of 82% of these companies recovered better than the market average in the following 6 months.
Smart Vietnamese investors should pay special attention to information about treasury share repurchase plans of listed companies. In particular, they should carefully analyze the following factors: (1) repurchase size compared to total shares, (2) source of funds used for repurchase, (3) expected purchase price compared to market price and intrinsic value, and (4) implementation time. This information often reflects the true perspective of leadership on the value and prospects of the business.
Smart investment strategies related to treasury shares in Vietnam
Vietnamese investors can build effective investment strategies based on a deep understanding of what treasury shares are and the significance of repurchase programs. These strategies need to be adjusted to suit the characteristics of the Vietnamese market - where information is not truly symmetric and market reactions are sometimes not completely efficient.
Effective methods for analyzing treasury share repurchase information
- Closely monitor the SSC's information disclosure schedule for companies' share repurchase plans
- Evaluate the repurchase ratio (over 5% of outstanding shares usually has a strong impact)
- Analyze the financial situation, especially cash and short-term investments
- Compare expected repurchase price with intrinsic value calculated using DCF, FCFF, or P/B models
- Review the company's history of repurchasing and reissuing treasury shares in the last 3-5 years
| Investment Strategy | Implementation Method in Vietnam | Suitable Market Conditions |
|---|---|---|
| Buy before official announcement | Filter companies with low price-to-book ratio (P/B) below 1, large positive cash flow, and positive repurchase history | Market down more than 20%, industry average P/E below 5-year historical level |
| Buy immediately after official announcement | React quickly within 1-2 days after the company announces BOD/AGM resolution on repurchase | Large-scale repurchase plan (>7% of outstanding shares), company with strong financial capability |
| Buy throughout the repurchase process | Monitor daily transaction reports, buy when trading volume increases dramatically | Market liquidity large enough, company buys at a steady pace over a long period |
| Long-term investment strategy | Focus on companies that have completed repurchase programs and have clear development plans | Company with good fundamentals, ROE >15%, low debt-to-equity ratio, industry with growth prospects |
Treasury shares are a special type of stock carrying valuable information for smart investors in Vietnam. When properly and fully understanding the meaning of repurchase programs, investors can discover investment opportunities before the market fully reflects the information. This is especially important in the Vietnamese stock market, where there are still many information asymmetries and market efficiency is not high.
Pocket Option provides an exclusive "Treasury Stock Analyzer" toolkit allowing Vietnamese investors to filter and analyze stocks based on treasury share repurchase activities. This tool integrates technical indicators on unusual trading volume, foreign investor purchase ratios, and analytical reports from leading securities companies, helping investors make informed decisions based on comprehensive data.
Risks and considerations when investing in stocks with repurchase activities in Vietnam
Although share repurchases usually bring positive signals, Vietnamese investors need to fully identify potential risks. The question "do treasury shares receive dividends?" is just a small part of the overall picture of the impact of this activity.
| Risk | Specific Manifestation in Vietnamese Market | How to Identify and Avoid |
|---|---|---|
| Non-transparent motives | Some businesses repurchase shares only to "beautify" financial indicators before reporting season | Analyze governance history, annual report quality, and transparency in information disclosure |
| Inefficient use of money | Businesses use cash to buy shares instead of investing in new projects with potential | Check return on invested capital (ROIC) compared to weighted average cost of capital (WACC) |
| Decreased liquidity | After large repurchases, many VN stocks decrease sharply in liquidity, difficult to buy/sell | Only invest in stocks with average trading value >10 billion VND/day |
| Borrowing to repurchase | Some real estate and retail businesses borrowed to repurchase treasury shares in 2022-2023 | Monitor debt/EBITDA ratio and interest coverage ratio |
| High valuation when repurchasing | Many companies repurchase at prices 20-30% higher than fair value | Compare purchase price with valuation models like DCF, P/B, EV/EBITDA |
A noteworthy point in the Vietnamese context is that share repurchases sometimes reflect the absence of new effective investment opportunities. When a company like Vinamilk uses thousands of billions of dong to repurchase shares instead of expanding factories or penetrating new markets, this may indicate that the industry's growth prospects have slowed down. Investors need to clearly distinguish between repurchases due to undervalued stock and repurchases due to lack of development strategy.
Some financial experts in Vietnam even express contrary views that aggressive treasury share repurchases may cause the market to lose liquidity and diversity, especially in the context where many listed companies still have low free-float ratios. However, this is a controversial view and needs to be considered on a case-by-case basis.
Pocket Option provides in-depth risk analysis reports for treasury share repurchase programs, helping Vietnamese investors have a multi-dimensional and objective view. This report evaluates financial, governance, and market psychology factors, creating a solid foundation for investment decisions.
Legal framework for treasury shares in Vietnam: Important points to note
In Vietnam, what are treasury share activities are strictly regulated by many important legal documents. This legal framework has undergone many changes in recent years, creating more favorable conditions for share repurchase activities.
| Legal Aspect | Current Regulations in Vietnam | Comparison with International Regulations |
|---|---|---|
| Repurchase limit | Maximum 30% of total issued shares (Decree 155/2020/ND-CP) | Thailand: 10%, Singapore: no limit, USA: no limit |
| Holding period | No limit on treasury share holding period (different from pre-2020 regulations) | Similar to most developed markets |
| Transaction method | Mandatory through stock exchange (order matching or negotiation) | Stricter than many countries (USA allows OTC, darkpool purchases) |
| Information disclosure | Disclosure 20 days before, during the process, and after completion (10 days) | More detailed than Thailand and Malaysia, equivalent to Singapore |
| Legal funding sources | Share premium, undistributed profit after tax, investment and development fund, other owner's equity sources | Similar to regulations in most countries in the region |
According to the 2019 Securities Law and guiding documents, treasury shares are shares without ordinary rights. Do treasury shares receive dividends? No, this is a clear regulation with no exceptions. Additionally, treasury shares are not counted in the shareholder attendance ratio to determine conditions for conducting the General Meeting of Shareholders, and are not allowed to be transferred while the company is implementing procedures for splitting, separating, or consolidating shares.
A notable development is that in March 2020, the Vietnamese Government issued Decree 155/2020/ND-CP replacing Decree 58/2012/ND-CP, raising the treasury share repurchase limit from 25% to 30% and removing the regulation on maximum holding period (previously 1 year). These changes have created more favorable conditions for businesses to implement large-scale treasury share repurchase programs with greater flexibility.
Pocket Option always updates the latest changes in legal regulations related to treasury shares in Vietnam, helping investors keep up with adjustments that may affect investment strategy. Through this platform, investors also gain access to in-depth analyses of the impact of legal changes on the Vietnamese stock market.
Conclusion: Treasury shares and smart investment strategy for Vietnamese investors
What are treasury shares? They are an important financial instrument that Vietnamese investors need to master to build effective investment strategies in a market that still has many fluctuations. Through in-depth analysis, we have clearly seen the multidimensional impact of treasury share repurchase activities on business value and investment opportunities.
Key points that Vietnamese investors should remember about treasury shares include:
- Treasury shares are shares that have been issued and subsequently repurchased by the company, with no voting rights and no dividend entitlement
- Share repurchases can significantly improve financial indicators such as EPS, ROE, and P/E, creating value for existing shareholders
- In Vietnam, treasury share repurchase activities have become more common, especially during market correction periods
- Large-scale repurchase programs (>5% of outstanding shares) usually bring significant positive impact to share prices
- Investors need to carefully analyze the motives, scale, and funding sources for treasury share repurchases before making decisions
In the context of the Vietnamese stock market becoming increasingly mature with the participation of many institutional and foreign investors, understanding and leveraging information about treasury shares will create a significant competitive advantage. Pocket Option provides comprehensive in-depth analysis tools and real-time updates on treasury share repurchase activities, helping Vietnamese investors make wise and timely investment decisions.
Remember that no investment strategy is perfect for everyone. Each investor needs to build their own strategy based on their financial goals, risk appetite, and investment horizon. However, in the knowledge toolkit of smart investors in the Vietnamese stock market, a deep understanding of treasury shares and their impact is an indispensable element, especially in the current period of market volatility.