Wall Street sneezes, local markets shiver

VNStockNews.com - Domestic stock indices continued on a downward spiral last week as global market fluctuations continued to have a significant impact on local investor sentiment.

On the HCM City Stock Exchange, the VN-Index lost 32.24 points overall last week to close at 554.88 points, a decline of 5.49 per cent from the previous Friday's close.

The average daily trading volume dropped by 26 per cent from the previous week's average to 57.6 million shares, while trading values averaged VND2.7 trillion (US$146 million) per day, down 25 per cent from the previous week's figure.

On the Ha Noi Stock Exchange, the HNX-Index closed at 189.14 after losing 10.24 points during the course of the week, a cumulative loss of 5.14 per cent.

Daily turnover averaged VND1.4 trillion (US$75.7 million), a decline of 22 per cent from the previous week's average, as average daily volume fell by 20 per cent to around 34 million shares.

"Stock market developments should have tracked changes in the economy and the business results," said the head of the Viet Nam International Securities Co analysis department, Ngo Thanh Phat. Significant growth was being seen in GDP, industrial production and retailing, he said, and most listed companies had seen strong business results this year.

But recent sharp slumps on Wall Street had strongly affected domestic investor sentiment, said Phat, while tighter credit from financial institutions that have financed securities had put even more pressure on the market.

Significant, impacts also came from continued net sales by foreign investors on the HCM City Stock Exchange, he added. Foreign investors were net sellers of 897,200 shares on the HCM City bourse last week, with a net value of VND200.3 billion ($10.8 million). But in Ha Noi, they finished the week as net buyers of 1.15 million shares, worth a net of VND32.3 billion ($1.7 million).

"Analysing the grounds for recent declines, we don't see any factors that are truly worrying for the market," said Sacombank Securities Co general director Nguyen Ho Nam. Recent fluctuations of the Dow Jones Industrial Average were necessary adjustments, he said, and many US economic indicators and corporate results were quite encouraging.

"It's still early to declare the downward trend over," said Phat. "But with the sharp slumps of stock indices over the last two weeks, the majority of shares have seen new foundations for their prices which are quite reasonable for investing."

He set 530 as the new resistance point for the VN-Index if downward trends continued, arguing that restrictions on leveraged investments would ultimately facilitate market stability.

Manulife Viet Nam Fund Management Co chief investment officer Sebastian Subba told Dau tu chung khoan (Securities Investment) that the second economic stimulus package adopted recently by the National Assembly session could do little to help investor psychology, and he predicted that the stock market would likely to continue to see many ups and downs until an official document about the package was issued.

A matter worrying investors, Nam said, was the rumour that the nation's credit growth had exceeded 30 per cent and that the State Bank of Viet Nam would implement credit-tightening measures to hold banks to the target.

The Government's subsidised-interest loan programme had boosted total outstanding commercial bank loans to VND400 trillion ($21.6 billion), he said. But as the loans were short-term, total outstanding loans were expected to decline sharply by December 31.

"The economy still needs a supportive monetary policy, so now may not be a time for the central bank to carry out monetary-tightening measures," warned Nam.

"If we don't continue to see negative news from Wall Street, we suppose that the market will stablise with strong rallies," Nam added. "There's a very high possibility that the VN-Index will surpass 650 in the near future".