Bank capital woes depress shares
Benchmark indices on both of the nation's stock exchanges declined sharply this past week, influenced by the pressure on commercial banks to increase their charter capital and meet stricter capital adequacy requirements.
On the HCM City Stock Exchange, the VN-Index fell 6.23 per cent – the largest weekly loss so far this year – to close on Friday at 452.73. On the Ha Noi Stock Exchange, meanwhile, the HNX-Index dropped by 7.69 per cent to end the week at 134.97.
Depressed share prices attracted a number of bottom-catching investors, helping lift volumes and values, although they remained anaemic on both exchanges.
An average of 41.5 million shares changed hands daily on the HCM City bourse, for an average value of nearly VND1.1 trillion (US$57.6 million) – an increase of 21.8 per cent in volume and 9.6 per cent in value over the previous week. In Ha Noi, the average daily trading volume jumped by 30 per cent to 28.2 million shares, for an average daily value of VND903.5 billion ($47.3 million).
Only nine codes out of 256 on the HCM City market posted gains for the week, while only 20 out of 323 shares advanced in Ha Noi.
Foreign investors concluded the week as net buyers on the HCM City bourse, picking up a net of VND193 billion ($10 million) worth of shares, but they were net sellers in Ha Noi by a margin of just VND3 billion ($157,100).
Although Friday's session saw increased trough-catching buys, any market rebound this week was expected to be hard fought.
Last week, 14 commercial banks asked the State Bank of Viet Nam for additional time to comply with tougher capital adequacy requirements. However, a State Bank of Viet Nam source yesterday said this request was unlikely to be granted.
The Vietnamese banking system was already maintaining lower standards than international norms set in BASEL 2 for the banking system, State Bank of Viet Nam Governor Nguyen Van Giau said last week.
However, a financial analyst who spoke on condition of anonymity told Viet Nam News that the State Bank decision to impose the stricter requirements in October as stipulated by regulation would make it even more difficult for banks to offer lower interest rates on loans and result in slower credit growth.
"This will further restrain investment inflows to the stock market," he said.
Hoang Thi Hoa, head of analysis for Viet Capital Securities Company, said investors knew about the coming deadline over a month ago and did not respond negatively until this week.
She suggested the current bear market was a symptom of more widely-depressed investor confidence.
"Recent slumps on the US stock market further worsened the domestic situation," Hoa said, noting that a prolonged market decline had begun to weigh on securities companies, forcing many of them to dump shares they had held pledged as collateral.
Although acknowledging that the market remained high-risk for new investment, FPT Securities Company analyst Nguyen Van Quy said investors could still purchase sound shares at current prices, with many shares currently undervalued.
"Investors can buy highly-liquid shares which have dropped over 20 per cent and now have price-to-earnings ratios below 10x," said Quy. "However, the use of financial leverage is not recommended at this time."
This week, several companies will list additional shares, further adding to the current market glut, including Kinh Bac City Development (KBC), with a planned listing of nearly 97 million shares, Vincom (VIC), with over 40 million, and Phu Nhuan Jewelry (PNJ), with nearly 20 million.
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