Reasonable Allocation of Cash and Shares

 

The market did not react to the slowing CPI growth of 1.32 per cent in February. Unlike in previous years, monthly CPI growth usually peaked in February. This year, a few groups of commodities and services in CPI basket like transportation and catering services had a little rise while others were almost unchanged.

 

This slowing pace was attributed to consumption cutdown when the people tightened spending. Moreover, rumours about the detention of BIDV Chairman Tran Bac Ha unnerved investors. The market witnessed massive offloading at the back of rumours. Liquidity tended to decline although daily trading volume was still hovering at120 million shares a day. In addition, investors seemed to lose interest as blue-chips were traded narrowly. Banks and real estate companies caught the fancy of investors. To date, seven listed lenders have reported earnings. Military Bank (MBB), Vietinbank (CTG) and Vietcombank (VCB) said their profit in 2012 were as much as in 2011. Asia Commercial Bank (ACB), Sacombank (STB) and Eximbank (EIB) saw sharp declines in earnings, ranging from 30 per cent to 60 - 70 per cent. Saigon Hanoi Bank (SHB) incurred a loss of VND95 billion after it made provisions for bad debts of merged Habubank.

 

Many real estate companies suffered huge losses last year. Song Da Urban & Industrial Zone Investment and Development Joint Stock Company (SJS) suffered a loss of more than VND300 billion last year while PetroVietnam Construction Corporation (PVX) reported a loss of VND1,222 billion. Besides, the prolonged slump of property market gave rise to mounting inventories. Complete housing projects could not find buyers while ongoing projects increased their bad debts. Hence, new cash flows are unlikely to flow into the market given what companies have announced.

 

Investors tend to be more cautious, especially foreigners. In the first weeks of February, foreign indirect investment flows increased in regional markets like Thailand, Indonesia and the Philippines but declined in Vietnam to a certain extent. When share prices rise to 2.5 - 3 times of book value, they obviously lose appeal.

 

The market may undergo corrections because of weakening demand of domestic and foreign investors. Besides, gasoline prices are forecast to climb VND500 - 700 per litre if world prices go up. This may push pup CPI in the coming months. In addition, exchange-traded funds (ETF) review tracker portfolios in early March 2013 and this may cause certain sentimental impacts and affect share prices, especially VN-30 shares. So, investors should keep more rational cash and share positions.