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Gov’t efforts to prime pump not enough
From lower petrol prices to prime rate cuts, domestic measures were ineffective this past week to keep Viet Nam's stock market from following global markets down-ward.
Good news for the domestic market last week included the Ministry of Finance's approval of an additional VND1,000-per-litre cut in petrol prices, and the State Bank of Viet Nam's move to cut the prime interest rate by an additional percentage point to 11 per cent, which enabled banks to further lower lending rates to enterprises.
Sacombank also began buying back 25 million shares on Tuesday, a move intended to soak up an oversupply of shares and shore up investor confidence.
But, in addition to the global economic downturn, last week also saw rising concerns about slowing economic growth and possible disappointing results in the fourth-quarter performance of domestic enterprises.
All this conspired to push the VN-Index down 33.11 points overall during last week, to 318.96, or 9.4 per cent lower than the previous Friday's close, and falling below the rock bottom of 322.8 hit back on October 28.
Trading volume reached 58.63 million shares, 13.8 per cent lower than in the previous week. Total turnover was VND1.48 trillion, a decline of 21.3 per cent.
Foreign investors continued to be net sellers during the week's trading sessions, picking up 5.8 million shares but unloading more than 10 million. Net sales for the week totalled VND163.6 billion (US$9.85 million).
Minister of Planning and Investment Vo Hong Phuc predicted at an industrial conference last Friday that interest rate cuts, together with eased inflationary pressures and more stablised conditions relating to credit, the monetary system and international payments, would facilitate a stock market rally by the end of the year.
Bui Nguyen Huan, chief representative of the State Securities Commission in HCM City, agreed that the global crisis would not have enormous direct impact on the domestic stock market, as domestic financial organisations were not closely connected with international institutions. However, there would be impacts on exports and foreign investment.
"Still, the market is being heavily affected in terms of psychology," Hoan said.
Sacombank Securities general director Nguyen Ho Nam said that, since the company began in August to lend again against securities as collateral - using VND300 billion financed by Sacombank - it had disbursed only 20 per cent of the sum.
"It's not easy to disburse the entire amount," said Nam. "In the context of the global financial crisis and ongoing domestic economic concerns, investors are hesitant to borrow from banks to deal in securities.... and banks have also imposed stricter credit conditions due to the high risks."
Au Viet Securities chairman Doan Duc Vinh also said that high interest rates and slumping stock prices had conspired to scare investors away.
"The stock market can only stablise when the economic difficulties are truly over," said Nam.
Kieu Huu Dung of ACB Securities Co echoed the sentiment, recommending that the Government should take measures to stimulate production and demand in the economy.
In Ha Noi last week, the HASTC-Index ended at 103.9 points after losing 8.11 per cent over the previous Friday. About 32.6 million shares changed hands, down 25 per cent over the previous week. Turnover reached VND897.3 billion, a decrease of 25.2 per cent.
Viet Nam News
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