Stock Market

“Without Emphasizing Investor Relations, Companies Struggle to Attract Investors.”

"By allocating time and resources to effective IR practices, businesses can facilitate capital mobilization for investment and production development. This approach empowers companies to move away from a reliance on debt and instead foster a more advantageous position for their operational growth."

Administrator

27 August, 2024

151

Mr. – Director of Capital Market Consulting, Investment Banking Division, Tien Phong Securities JSC (TPS, HOSE: ORS) shared his insights on the importance of Investor Relations (IR) for listed companies in the current context.

Mr. Nguyen Trong Thanh

According to Mr. Thanh, in Vietnam, with nearly 1,000 companies listed on the two stock exchanges (HOSE and HNX), investors have a wide range of choices. Therefore, if companies do not focus on IR, they may struggle to attract investors.

On the other hand, most companies consider IR merely as uploading financial reports on their websites, paying little attention to clarifying their business and investment activities. As a result, the effectiveness of information dissemination to investors and shareholders is not optimal. This leads to a decrease in engagement, especially from institutional investors, who have substantial financial resources and can accompany companies in the long run.

“When companies dedicate time and resources to effective IR practices, it will facilitate their capital mobilization efforts for investment and business development, rather than relying mainly on debt,” added Mr. Thanh.

For this reason, when approaching and formulating initial capital mobilization strategies for corporate clients, TPS always focuses on consulting and supporting the development of IR activities in a systematic and transparent manner, laying a solid foundation for the success of IB transactions.

The Vibrant IB Market

According to Mr. Nguyen Trong Thanh, Vietnam’s investment banking (IB) market is thriving and full of potential, benefiting from economic growth and investment trends.

Specifically, the Vietnamese economy is on a recovery path, with a projected growth rate of 5.5% in 2024 and 6.0% in 2025. This bodes well for investment activities and the development of the IB market.

Additionally, Vietnam continues to attract investors’ attention due to its robust economic growth, young and skilled workforce, and favorable business environment.

In terms of capital mobilization, investment banks play a crucial role in raising capital for businesses through various activities such as equity and bond issuances, along with other financial products.

Another factor that has garnered significant interest recently is the story of the stock market upgrade. It is estimated that the upgrade could attract a substantial amount of new investment capital from international investors if Vietnam is upgraded by both FTSE Russel and MSCI. Simultaneously, addressing issues such as improving information disclosure, increasing access to stocks that have reached the foreign ownership limit, and, most importantly, raising the foreign ownership limit, as well as continuing to offer large equity sales, including privatizing large state-owned enterprises, are considered.

The upgrade signifies a turning point for the Vietnamese market and demonstrates the government’s commitment to market development.

“We believe that this will have a significant impact on the psychology of investors, both domestic and foreign; unlocking investment capital and helping the capital market to more clearly demonstrate its role as an effective channel for capital mobilization for the economy, reducing pressure on banks. This will positively affect the IB market, boosting advisory activities on issuance, capital arrangement, and M&A to anticipate the large inflow of foreign investment mentioned above,” said Mr. Thanh.

Despite its potential, the IB market in Vietnam also faces challenges, including global economic fluctuations and legal regulations. However, with support from the government and international financial institutions, this market can continue to develop sustainably.

Businesses Need to Promote ESG Through Five Aspects

The goal of ESG is to ensure that business operations focus not only on profitability but also on environmental protection, social responsibility, and transparent and effective governance. A higher ESG score indicates a company’s strong commitment to sustainable and responsible practices.

Nowadays, investors tend to consider non-financial factors before investing in a company. Therefore, according to Mr. Thanh, the importance of an ESG strategy is increasingly emphasized, helping businesses achieve long-term and sustainable success.

To promptly meet ESG (Environmental, Social, and Governance) criteria, companies should focus on the following aspects:

Integrate ESG into the business strategy: To attract investors’ attention, companies should consider incorporating ESG into their core business strategy. Develop a clear ESG narrative that aligns with the company’s mission.

Demonstrate strong environmental practices: For energy-intensive production companies, optimizing energy use and saving 20-30% of energy input will reduce costs and emissions, especially in the context of Vietnam being a high-emitting country.

Prioritize social impact: Investors are often drawn to companies that positively impact society and prioritize social responsibility. Foster a positive work environment that promotes diversity, equality, and inclusivity.

Emphasize good governance: Investors value effective corporate governance practices. Establish a transparent and accountable governance structure. This may include implementing ethical codes of conduct, ensuring the independence of the Board of Directors, and effectively managing risk frameworks.

Implement ESG reporting and transparency: To attract interested investors, it is crucial to communicate the company’s ESG efforts transparently. Adopt a comprehensive ESG reporting framework, adhering to recognized standards such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB). Regularly report on ESG performance, targets, and achievements. Ensure easy access to this information, demonstrating the company’s commitment to transparency and accountability.

Capital as a Major Competitive Factor

TPS continues to strengthen its position as the second-largest bond underwriter while expanding its potential business lines such as listing advisory, financial restructuring consulting (divestment, capital arrangement, and merger), debt advisory, and underwriting services…

Regarding its competitive advantage, TPS has built a solid foundation and demonstrated its consulting capabilities, positioning itself for future growth in capital and debt securities issuance advisory services. TPS remains steadfast in its commitment to sustainable development, choosing to work with well-known and reputable issuers to advise and distribute offerings to investors.

TPS identifies capital as a significant competitive factor, implying that investment banks must possess substantial capital to engage in IB activities. Accordingly, in 2024, TPS increased its charter capital to VND 3,359 billion and plans to further increase capital in the near future.

Additionally, another critical competitive advantage for TPS is its close collaboration with TPBank. This partnership enables TPS to implement diverse capital arrangement structures in IB transactions.

In terms of orientation, TPS continues to emphasize IB as one of its core business pillars. TPS views this as a fundamental aspect of securities operations, directly contributing significantly to the company’s profit plan. Developing the IB segment will drive the growth of related business areas, such as increasing the client base for brokerage services, indirectly boosting margin activities, and creating opportunities for proprietary trading…

In the next five years, TPS’s IB services will gradually shift towards diversification, emphasizing capital arrangement, equity and debt securities issuance advisory, and M&A consulting. Meanwhile, TPS will continue to leverage its strengths and leadership in debt securities issuance advisory and arrangement.