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Financial meltdown spurs stock slump
Investor concerns about long lasting difficulties on the global financial markets drove the domestic stock indices down last week.
HCM City Stock Exchange's VN-Index lost 31.67 points over the week, or 6.5 per cent, to close at 452.14.
Liquidity declined, with trading volume at around 14.29 million shares per day, down 34 per cent over the previous week. Daily turnover averaged VND522.78 billion (US$31.68 million), a fall of 32.3 per cent.
On the Ha Noi Securities Trading Centre, the HASTC-Index ended at 152.02 after losing 8.29 points or 5.1 per cent over the week.
Around 9.4 million shares changed hands per day, a fall of 15.2 per cent over the previous week. Daily revenue reached VND339.3 billion ($20.56 million), down 12.2 per cent on the pervious week's average.
The indexes didn't rebound until last Thursday, when the US Senate endorsed a revised version of the $700 billion bailout of the financial industry, putting pressure on the House of Representatives to approve the plan that political and financial leaders called crucial to averting economic catastrophe.
But share prices dropped again on Friday with investors fearing that the US financial rescue plan might not be enough to prevent the US economy and the rest of the world from slowing down further.
Foreign investors were net buyers last week with net purchases reaching VND36 billion ($2.2 million).
Transaction levels for foreigners, however, fell significantly with about 2 million shares bought and 1.9 million units sold a day. Purchases dropped by 60 per cent over the previous week, while sales fell by 32 per cent.
"Last week showed investors' clear reservations in front of mixed information," said Nguyen Tuan, an analyst from FPT Securities' Analysis Department.
In the first nine months of the year, total registered foreign direct investment (FDI) reached $57 billion. Performed FDI had reached $8.1 billion so far this year, higher than last year's total. This helped compensate for the country's trade deficit, which had declined in the last few months, he said.
National foreign currency reserves reached around $23 billion, about $1.6 billion higher than figures posted at the end of the second quarter, said State Bank of Viet Nam (SBV) Governor Nguyen Van Giau.
The rise in foreign reserves was the result of the SBV's decision to buy back US dollars, as well as the decline in import turnover in the third quarter, according to Tuan.
Three leading local petroleum importers, including the Viet Nam National Petroleum Corporation, last Wednesday cut their kerosene prices by VND1,000 in a move to support production activities; while banks gave lending incentives to small- and medium-sized enterprises and exporters to boost the private sector.
The SBV last week announced that outstanding loans for real estate totalling VND115 trillion (nearly $7 billion) accounted for 9.5 per cent of the total commercial bank loans. Most concerns are now with large property projects in the suburbs with their market prices having fallen sharply this year.
This would cause problems for commercial banks in the coming months as the maturity dates of the loans were coming, said Tuan.
"The economic situation is getting better but it's likely mat the market will stay level in the medium term," Tuan said, adding that investor confidence was not strong.
"Hopes still remain over the rescue plan for the US financial market and domestic listed firms' third-quarter business results," he said. "This will make this week a testing time for investor sentiment".
Tuan expects the VN-Index to range between 445 and 470 points this week. "But it could fall to around 400 if the market is not supported by positive news," he added.
Director of EuroCapital's Analysis Department Ngo Van Minh said it was unlikely that the market would go up until mid-October when companies' third-quarter business results were announced.
He added that the US$700 billion plan signed into law last Friday made investors feel more secure.
Ken Tai Chee Ming, Senior securities analyst at Kim Eng Corporation, said the US financial crisis would have no great impact on the domestic economy between now and the end of the year.
But Ken Tai said that due to fluctuations in the global financial markets, disbursement of foreign funds would become sluggish in the coming months.
Chairman of the State Securities Commission Vu Bang said last Friday that the commission was proposing anti-crisis proposals to the Government for the local stock exchange to minimise the negative effects of a US recession.
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