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Vietnam, global market link slips amid growth, IPO concerns
Vietnam’s link with global markets has weakened as slowing economic growth and a pending supply of new shares from the country’s fourth-largest bank weigh on investor sentiment, PXP Vietnam Asset Management said.
The Ho Chi Minh Stock Exchange’s VN-Index fell 3.7 percent on Monday, its biggest one-day loss in four weeks, even as markets surged in China, Hong Kong and Japan.
In November, the measure moved in the same direction as Japan’s Nikkei 225 Stock Average on 13 of 18 joint trading days. It had a correlation on 14 of 20 trading days with Hong Kong’s Hang Seng Index.
Recent VN Index moves “suggest that the short-term correlation to global markets is now over,” Kevin Snowball, chief executive of PXP, wrote in a note. “We in Vietnam seem to be leading the way into a great depression, at least philosophically if not financially.”
Vietnam’s gross domestic product may grow 5 percent next year, down from 6.25 percent this year and the slowest pace in a decade, the International Monetary Fund said last week. The economy is facing slowing exports stemming from a recession in the US and Europe, its biggest markets.
A growth of 5 percent should be taken as a “mild positive” given the global economic environment, Snowball said in a telephone interview Tuesday from Ho Chi Minh City.
“Vietnamese investors are ignoring positive developments, and using bad news as an excuse to sell,” he said.
Vietnam Bank for Industry & Trade, the country’s fourth-biggest lender by assets, plans to hold an initial public offering on December 25. About 4 percent of the company will be sold by the government, according to a statement on the website of the Hanoi-based lender.
Liquidity drain
The share sale “is being interpreted as mildly negative for the VN-Index now because it’s a drain on liquidity,” Snowball said. “That’s money that could otherwise go into the market.”
The Japanese government’s announcement last week that it was suspending development aid to Vietnam because of concerns about corruption is also being taken negatively, he said.
With Japan removed from the list of so-called donors this year, low-interest loans and grants pledged to Vietnam by countries and agencies fell to US$5 billion from the $5.4 billion figure announced a year ago, the first decline since 2001.
“If it sends a signal that reduces the misuse of aid in time, it should be seen as positive over the longer-term from the fact that people are now prepared to take steps against corruption,” Snowball said. “But in a bear market, everything is interpreted as a reason to sell.”
The VN-Index rose 1.6 percent Tuesday, its biggest gain since November 28. The measure has declined 68 percent so far this year, the worst performing Asian benchmark index.
Bloomberg
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