HANOI: Phu Nhuan Jewelry JSC, Vietnam’s largest listed jeweller, is facing a crisis of confidence after police detained the former head of its gem certification subsidiary over his alleged links to a transnational diamond-smuggling ring.
Shares in PNJ, as the company is known, have plummeted more than 25% since news of the investigation broke in early July.
Police accuse Dang Ngoc Thao, the former director of wholly owned unit PNJ Laboratory Co. of involvement in a criminal network that allegedly smuggled diamonds from India to Vietnam via Hong Kong, according to a Ministry of Public Security statement.
PNJ has said the allegations relate to Thao, not the company, adding that no smuggled diamonds entered its retail network and it is fully cooperating with authorities.
Still, the incident has rattled investors. A group of funds managed by VinaCapital have reduced stakes in PNJ and are no longer major shareholders, according to an exchange filing.
PNJ must "restore the confidence of both customers and investors in its corporate governance,” Chi Luong, an analyst at ACB Securities JSC, wrote in a note.
"Should the company fail to rebuild trust, or if the ongoing investigation uncovers more serious issues directly involving the company, the situation could become significantly more difficult to manage.”
Thao couldn’t be reached for comment. He was arrested in connection with a diamond bust in Thanh Hoa province in which investigators estimate smugglers imported more than 28,000 stones worth about 280 billion dong (US$11 million) since 2024.
Thao was accused of purchasing illicit gemstones and legitimizing them by removing their Gemological Institute of America (GIA) laser inscriptions, re-engraving them with P-Lab identification codes and issuing new certification documents before selling them for profit.
Police also detained three prominent Ho Chi Minh City jewellery business owners and another PNJ-Lab Co. employee over alleged links to the smuggling ring on Tuesday, news website VnExpress reported.
PNJ has not been accused of wrongdoing, but the company is acting to shore up market confidence. Chief Executive Officer Phan Quoc Cong registered on July 11 to buy one million PNJ shares, and the company also plans to buy back stock next month.
PNJ maintains a "highly prudent and stable financial foundation,” according to Chairwoman Cao Thi Ngoc Dung.
"Backed by solid financial reserves and the ongoing support of our financial partners, we have sufficient resources to navigate the current circumstances,” she said in a July 4 letter to shareholders, investors and analysts.
Corporate governance has been a persistent concern for foreign investors in Vietnam. While the country’s rapid economic growth and expanding stock market have attracted increasing international capital, investors continue to scrutinise corporate transparency, minority shareholder protections, related-party transactions and disclosure standards.
Those issues are likely to become even more significant as Vietnam prepares to join FTSE Russell’s secondary emerging market index later this year, a move expected to draw billions of dollars in passive and active investment.
The diamond sector now appears set to become the latest focus of Vietnam’s sweeping regulatory drive to restore confidence in key markets and improve governance. The campaign began in 2022 with a crackdown on misconduct in the corporate bond and real estate sectors, culminating in the prosecution of several high-profile executives, including real estate tycoon Truong My Lan.
Since then, the government has tightened regulations on corporate bond sales to rein in speculation and reduce financial risks stemming from the property market.
More recently, authorities have turned their attention to the gold market, rolling back the state’s monopoly on bullion production to boost supply, narrow the gap between domestic and global prices and increase competition.
The reforms are reshaping Vietnam’s jewellery market by allowing major private firms to apply for production licences, expanding their sourcing flexibility and improving access to gold inputs.
For PNJ, the reputational risk is "significant and the company will need fast, effective crisis management to preserve customer confidence and defend long-term market share,” said Quynh Cao, head of institutional business at VNDirect Securities Corp.
After an initial flurry of customers brought diamonds to stores for resale or reverification, business appeared back to normal in Hanoi on Tuesday.
"When I first heard about the case, I was really worried and thought of selling,” said 45-year-old Thu Huong. But once she discovered that PNJ products are officially imported she no longer had any concerns.
"I’m not planning to sell my diamond rings. I’ll just keep wearing them.” - Bloomberg
