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Foreigners staying with Vietnam: SSC
Nguyen Son, Head of the Market Development Department under the State Securities Commission (SSC), sat down to discuss the US financial crisis and possible fallout for the bourses here.
There have been widespread discussions that SSC is considering narrowing the daily trading bands and will halt transactions for several days if the market continues to fall? Is this true?
A lot of people said that SSC has to take action now to interfere in the market, which has fallen for the last nine consecutive sessions. It has to either narrow the daily trading bands, or halt transactions. However, I have to remind you that the actual impact of the US financial crisis only began on Monday, September 15, when Lehman Brothers announced the bankruptcy. I mean the crisis caused the falls only in the last 3-4 trading sessions, not in all the nine trading sessions.
SSC is still closely watching the performance of the stock market, while it is not thinking of adjusting the daily trading bands at this moment. The daily trading bands of +/-7% for the Hanoi Securities Trading Centre (HASTC) and +/-5% for the HCM City Stock Exchange (HOSE) will stay in place.
How do you think will the US financial crisis, which relates to big names like Lehman Brothers and Merrill Lynch, affect Vietnam’s stock market?
It seems that people have excessive worries about the impact of the US financial crisis on Vietnam.
Obviously, the US financial crisis has had impacts on the world’s market, but the impacts on Vietnam’s market will not be big for several reasons. First, Vietnam, unlike Russia, does not have companies listed on the US bourses. Second, US investors do not hold high proportions of stakes in Vietnamese companies. Third, the foreign capital flow into Vietnam is not big. The value of the foreign portfolio investment in Vietnam is now estimated at $7-8 billion, which is nothing when compared to the huge capital on the US financial market.
The main impact of the US financial crisis on Vietnam’s market is that it affects investors’ sentiment. In Vietnam, many investors do not have much knowledge to analyse the situation.
People now have worries that foreign investors would withdraw money from Vietnam’s stock market. However, statistics showed that foreign investors still purchased more than they sold in the last several trading sessions, when the VN Index decreased. What would you say about that?
The total value of foreign portfolio investment is $7-8 billion. And a question has been raised that what foreign investors would do with the sum of $7-8 billion they get after selling stakes. It would not be a good idea to take back money to invest in the US or other markets.
Meanwhile, economic indicators are very good with consumer price index (CPI) and trade deficit on the decrease.
We have found out from surveys that foreign investors purchase more than they sell at the Hanoi Securities Trading Centre (HASTC) and sell more than purchase on the HCM City Stock Exchange, but the gap between sales and purchases is not big.
The specific characteristics of Vietnam’s stock market is that the stock prices are controlled by investor’s feelings. Investors always follow the crowd in making investment decisions. This can be seen in other markets.
I think investors should ask themselves: What would investors do after selling shares? The real estate market is frozen and gold is fluctuating all the time. Meanwhile, investments in stocks could bring investors a good turn as stock prices fall to reasonable levels.
VNN
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