Investor doubts send shares down

Published: 10/01/2011 05:00


Viet Nam’s stock markets performed
poorly in the year’s first trading week with the benchmark indices retreating on
both exchanges because of investor uncertainty over market trends.

Viet Nam’s stock markets performed
poorly in the year’s first trading week with the benchmark indices retreating on
both exchanges because of investor uncertainty over market trends.

On the HCM City Stock Exchange, the VN-Index dropped 0.58
per cent last week to close at 481.86 points.

Average daily trade value was down 46 per cent compared
with the previous week, reaching VND812.5 billion (US$38.7 million) as more than
60.1 million shares changed hands per session.

Bank and securities shares – twin pillars of the market –
fell sharply. Sai Gon Securities Inc (SSI), the most active stock on the
southern bourse with 1.8 million shares traded, declined 3 per cent in value
while Sacombank Securities (SBS) was the biggest decliner with a drop in value
of 20 per cent.

On the Ha Noi Stock Exchange, the HNX-Index slid 3.68 per
cent from the previous weeks’ close to end Friday at 110.04 points.

Trading value on the northern bourse also decreased 40 per
cent to just under VND476 billion ($22.7 million) per session with more than
24.4 million shares being exchanged.

Losses for major financial shares, including Asia
Commercial Bank (ACB), Ha Noi Housing Bank (HBB), Sai Gon-Ha Noi Bank (SHB), Bao
Viet Securities (BVS) and Kim Long Securities (KLS), were also responsible for
the poor showing of the HNX-Index.

However, foreign investor purchases helped to prop up the
markets last week. Total net buys for this sector hit VND221 billion ($10.5
million), of which VND164 billion was disbursed on the HCM City exchange and
VND57 billion on the Ha Noi exchange.

Viet Nam Securities Depository reported that it had
licensed 1,239 foreign investors last year, including 289 institutions and 950
individuals, raising the total number of foreign investors operating in Viet Nam
to 14,835.

The domestic stock market entered 2011 without clear market
policy information from the Government and this led many investors to question
the true level of market recovery.

“Interest rates are still high and the Government’s
determination to give priority to stabilising the economy in 2011 will likely
limit the money flowing into the stock market. The weakening of the market last
week has clearly shown this,” said Nguyen Quang Minh, an analyst with a Ha
Noi-based financial consultancy.

On Friday, Bloomberg sources said the central bank was
considering raising the compulsory reserve ratio for the domestic currency to 7
per cent and to 10 per cent for foreign currencies to curb inflation. This had
depressed the market and pushed many investors into selling off.

Minh said measures to fight inflation were necessary but
added that raising the reserve requirement ratio at the current time would make
interest rate reductions inevitable.

“If this becomes reality, investors and the stock market
will be negatively affected,” he said.

Late Friday, the State Bank of Viet Nam denied that such a
policy would be implemented at the present time.

However, Minh said “speculation” about the possibility
could still affect investor psychology this week.

“Sell offs will occur if the information does not appear
favourable,” he said.

A market report by analysts with Bao Viet Securities Co
said investor psychology appeared to be influenced by discouraging inflation
forecasts for the two months around the Lunar New Year holiday. These were
underperforming business results of many listed companies.

“Also, the deliberate intervention in the VN-Index by a few
large cap stocks raised doubts about any positive market signals,” said the

Analysts at SME Securities Co said the 2010 business
results of listed companies, due to be published in the coming weeks, would not
be outstanding, given last year’s high interest rates, an escalating exchange
rate and shrinking export markets. In related news, tomorrow will usher in a new
era for neighbouring Laos, with the country’s stock market opening for its first
ever day of trading. This new market promises attractive investment
opportunities with favourable factors including large permitted fluctuating

The fluctuating band for the first trading day ranges from
– 10 per cent to +100 per cent; investors can buy and sell in the same session
and open multiple accounts.

Market insiders say Viet Nam’s own stock exchanges have
failed to establish the same conditions in 10 years of operation. They say that
cash flow destined for investment in Viet Nam might now be “shared” with Laos.

Source: VNS

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