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Government may buy stocks, halt market to stem plunge
Vietnam may buy stocks to arrest a 57 percent slump in the benchmark index this year that has wiped out two-thirds of the gains since the country allowed its first exchange eight years ago.
The Ministry of Finance may also revert to narrower daily price limits or halt trading temporarily, State Securities Commission Chairman Vu Bang said in a telephone interview in Hanoi Tuesday. The ministry last week submitted the draft measures to prevent the global stock-market rout from deepening this year’s plunge in Vietnam, he said.
“We want to have a very well-prepared plan, but that doesn’t mean that Vietnam is bound to have a crisis,” Bang said. “We want to learn from the experiences of other countries, both when the market is good and bad.”
The Ho Chi Minh Stock Exchange’s VN-Index is Asia’s second-worst performing stock market this year after China’s 62 percent slide. Equities have slumped this year as the fastest inflation in at least 16 years forced the central bank to raise interest rates to 14 percent, the highest in Asia and the government to cut economic growth targets.
Prime Minister Nguyen Tan Dung, then a deputy, rang a bell to open the first stock exchange in Ho Chi Minh City on July 20, 2000. The benchmark index, which started at 100 on July 28, rose as high as 1,170.67 on March 12 last year. It has since slumped, finishing at 401.33 at Wednesday’s close.
“Crisis” plan
The State Securities Commission and the Ministry of Finance started working on the draft measures more than a year ago, Bang said, declining to say when they will be approved. The draft includes a structure for ministries and agencies to coordinate in resolving any “crisis” that occurs, he said.
Cao Thi Hong, vice general director of Vietnam International Securities Co., or VISecurities, said, “When it gets approved, the measures will be seen as a positive
move by the government to support the market, but the global crisis may make it more difficult for the plan to be successful.”
The worldwide rout, fueled by the deepening credit-market crisis, has erased more than US$20 trillion in value from stock markets worldwide this year and prompted government action to stem the slide.
Worldwide reaction
The US, UK and Australia banned short-selling, while China and South Korea ordered government-run companies to step up stock purchases. Russia, faced with imploding equities as oil prices retreat, has halted trading nine times in the past three weeks.
Prime Minister Dung asked the central bank to request commercial banks to review their operations to limit the local effect of the global financial crisis, according to a statement posted on the State Bank of Vietnam’s website on October 6.
Thanhnien
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