Vietnam Stocks Drop as Government Plans to Halt Loan Subsidies

VNStockNews.com - Vietnamese stocks fell, with the benchmark index dropping the most worldwide, after the government said it will halt a loan subsidy program intended to boost consumption and reduce manufacturing costs.

The VN Index, a measure of 187 companies listed on the Ho Chi Minh City Stock Exchange, snapped three days of gains, losing 3.1 percent to close at 499.14. Truong Thanh Furniture Joint-Stock Group, Vietnam’s biggest listed furniture maker, declined 4.9 percent to 27,300 dong.

The index has dropped 20 percent from an 18-month high on Oct. 22. The central bank last week devalued the currency and raised interest rates to narrow a trading deficit and curb quickening inflation. Yesterday, the government announced an end to subsidies on business loans because of the improving economy.

“The context of withdrawal of leverage in the market and loan stimulus against a growing budget deficit created some downward pressure,” said Adrian Cundy, head of research for Ho Chi Minh City-based VinaSecurities Joint-Stock Co., the brokerage unit of the VinaCapital Group.

Southern Rubber Industry Joint-Stock Co., Vietnam’s third biggest listed rubber company, fell 4.9 percent to 87,500 dong. Danang Rubber Joint-Stock Co. dropped 4.8 percent to 120,000 dong, the lowest since Sept. 11.

The VN Index has gained 58 percent this year, rebounding from a 67 percent slump a year earlier.

‘Positive Changes’

Vietnam will discontinue its short-term loan subsidy plan by the end of this year, earlier than expected, Nguyen Xuan Phuc, head of the government office, said yesterday.

“The economy has showed some positive changes,” Phuc said at a press conference in Hanoi. Speaking at the same briefing, central bank Deputy Governor Nguyen Dong Tien said the earlier cessation of subsidies reflected the changed situation following last week’s benchmark rate increase and dong devaluation.

Vietnam in January offered about 17 trillion dong ($919 million) in subsidies to encourage bank lending to businesses. Vietnamese banks lent about 416 trillion dong to companies as of Nov. 26, the central bank said in a Nov. 27 report on its Web site.

The Southeast Asian nation last week increased the benchmark interest rate to 8 percent from 7 percent. Consumer prices gained 4.4 percent in November from a year earlier, the biggest increase since May, and the trade deficit widened to $1.97 billion, compared with a revised $1.6 billion in October. (Bloomberg)