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Investors urged to take long-term view
Long-term investors will profit against the current stock market instability, EuroCapital Securities analysts suggested in their latest equity markets report published over the weekend.
"As curbing inflation is the leading issue," analysts wrote in the report," the Government will continue to restrict sources of credit for securities investment. With the daily securities trading band also tightened, short-term investment is unprofitable."
The report suggested traders direct investment toward petroleum, chemical and consumer goods stocks.
"These sectors are defensive at times like this and generate profits in times of inflation. Investors who invest in these sectors will see stable, albeit long-term, profits."
The report also indicated that foreign investors would participate less in the stock market in the second quarter than in the first, but were likely focusing their sights on major IPOs coming later this year.
According to EuroCapital Securities calculations, foreign investors bought US$130mil worth of stocks and fund certificates in the first quarter, while spending $230mil on bonds.
"This suggests this sector has begun paying more attention to long term and stable income from the stock exchange rather than on big but risky shares," the local brokerage said.
Difficulties in the global economy, especially a possible US recession and a weak dollar contributing to appreciation of the dong, has made foreign investors more cautious about securities investment in Vietnam.
Prognostications
The report predicted that the State Capital Investment Corporation would increase its market buy-in in the next quarter, and the Government would continue restraining credit for securities investment.
"These policies will continue playing an important role in market development in the second quarter."
The EuroCapital Securities analysts forecast that the VN-Index in the second quarter would reach around 570, identifying this as a reference point for investors gauging market performance and urging investors to plan investments carefully this second quarter.
The report noted that dangers of oversupply remained, particularly with a number of commercial banks holding a large amount of shares of diminished value in collateral for loans they made to securities traders.
If the daily trading band were loosened back to the previous 5% on the HCM City Stock Exchange, the release of these shares onto the market could trigger another steep decline in the VN-Index.
"Therefore, the narrow trading band will continue for the time being, which limits the Index to only modest gains," the analysts said. Some State-owned enterprises were still likely to carry out their initial public offerings (IPOs) as originally planned, under an old script by which offer prices exceed real market value.
The time between the IPO and the listing of shares has also had a dampening effect on the liquidity of shares and their attractiveness to investors.
Share of Vietcombank were auctioned last December, for instance, in a highly-publicised IPO but still have not been listed on the stock exchange.
The bank's shares traded at VND58,000 on the over-the-counter market (OTC) as of April 4, more than half of the winning bid price on the IPO back on December 26.
Sabeco shares were trading on the OTC market at VND48,000 on the same day, also well below the IPO winning price of VND70,003 on January 28.
The report suggested the Government revise the auction system for upcoming IPOs.
"The Government should direct equitised firms to choose strategic partners with detailed plans prior to going public. Furthermore, it should shorten the time between auction and listing in order to preserve liquidity of shares."
VNN
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