Vietnam Stock Market Seeks Rally

According to reporters of Vietnam Business Forum at securities firm, a majority of brokers advised customers to cut their holdings on fears of adverse impacts of Circular 07, and recommended waiting until banks provide new loans for equity assets.

 

To deal with Circular 07, many banks suspended new loans and notified securities companies to recover debts. Securities companies halted funding services and recommended customers to consider repaying debts to end the tripartite cooperation agreements as specified in the new regulations.

 

For their parts, securities investors will have to actively adjust their portfolios by selling stocks to repay securities loans to banks. Although this move has not occurred on a large scale and happened to only some stocks, this development has deteriorated the investor sentiment. Thus, even though brokerage houses are unlikely to be affected by the Circular 07, brokers still recommend customers to cut stock holdings to limit risks.

 

According to MBS Securities Company, the total margin value reached under the tripartite cooperation between banks, securities companies and investors accounted for only 20 per cent of total margin loans on the market, an equivalent to VND4 trillion. This is not a big sum in relation to a daily liquidity (about VND2 trillion).

 

Thus, it is undoubtedly positive that Circular 07 will not leave much impact on cash flow in the market but it happens in a relatively sensitive point of time. Many investors decided to take margins when the market gauge, VN-Index, climbed to the 580-point threshold and stayed on the sideline to wait for more information.

 

In the past days, companies engaged in construction materials such as steel, plastic, tiles and thermal electricity caught cash flows on high profit prospects while penny stocks plunged sharply on lack of hot money.

 

At present, many stocks have plummeted to strong support points but they failed to draw in cash flows as many investors waited for first-quarter portfolio restructuring by institutional investors, particularly investment funds. In addition, increased net buying by foreign investors helped ease investors’ reactions to Circular 07.

 

Although these estimations are only relative since current valuations are still quite attractive. But, investing into the stock market to enjoy dividends higher than deposit interest rate by 3- 4 per cent is not alluring enough to investors in relation to downward risks.

 

Macroeconomic data were quite disappointing since weak GDP growth raised concerns over the slowing economy weighed by extreme weather and ineffective manufacturing. The soft credit package, worth VND30 trillion, has been recently stopped by the State Bank of Vietnam (SBV).

 

There is a correlation with world markets since crude oil and basic commodity prices plunge. Terrorist attacks also affected European economies.

 

Mr Bach An Vien, Chief Analyst at KIS Vietnam Securities Company, said, given the current investor sentiment, a sharp slump is highly unlikely. Although the market has passed the toughest phase, it needs new momentum to make a rally. However, new motivations are still out of sight.

 

Remarking on market-leading stocks, Vien said there is a significant division among banks and oil-gas companies. Oil and gas companies advanced while banks performed worse than the overall market on profit concerns when the credit growth is disappointing.

 

According to the General Statistics Office (GSO), credit growth was 1.54 per cent in the year to March 21, marginally higher than the growth of 1.25 per cent in the same period of last year.

 

Many securities experts said the market tended to take a rest after a solid rally and investors needed a little more time to weigh up market factors, e.g. crude oil recovery or economic growth. These are fundamentals to guest the market revival.