More cash flows into stock markets

As the national economy is signalling a positive uptrend with more cash flows for investment and reductions in credit interest rates, the stock markets are expected to become more attractive again.

On the trading session on June 28, although there was much supporting good information, the Vietnamese securities market is still humdrum as the VN Index gained only 0.43 percent and HNX Index added with 0.47 percent growth with the total full value of market transactions reaching 2.6 trillion dong, down slightly from the previous session.

However, investors still expect cash flows strongly into the market in near future when the State Bank of Vietnam (SBV) recently met with leaders of commercial banks to discuss how to reduce lending interest rates from early in July.

Accordingly, large commercial banks will lower interest rates to 12 percent – 13 percent per year. According to the agreed schedule in three months, commercial banks will cut deposit interest rates down from the current 11.5 percent down to 10.5 percent per year. The rapid decrease in deposit interest rates is possible because the consumer price index has slowed down significantly in May.

With the credit growth target of 25 percent this year, in the first half this year, commercial banks reached the credit growth of 10.5 percent; the credit for the rest of the year is expected to grow 14.5 percent.
After several months of holding out, in June, the credit growth was stronger. Investors expect that the lower interest rates will stimulate business loans and increase the operational efficiency and profitability of enterprises in the future.

According to the Ministry of Planning and Investment, in the first six months of this year, Vietnam’s GDP growth hit about 6.2 percent, consumer prices increased only 0.22 percent this month, the growth was quite strong at exports and Vietnam’s outstanding foreign debt is still safe. Although the macro-economic picture is positive over the previous year, the stock markets seem still quiet with the low daily transaction value.

During the first half of this year, on the Hochiminh Stock Exchange, the average trading value reached only 1.89 trillion dong per session, while on Hanoi Stock Exchange; this figure was only 1.2 trillion dong, much lower than that of last months in 2009.

Currently, stock price on the two bourses are considered quite attractive, ranked the top lowest in the world. Many shares have healthy financial indicators, but P/E this year is estimated at only 5-7 times, half of the average P/E in previous years. While local investors do not want to hold shares, foreign investors remain being net buyers of Vietnamese stocks.

In the HCM City bourse alone, in the first six months of this year, foreign investors made a net purchase of more than 6.5 trillion dong, almost twice as high for the whole year 2009. This showed that foreign investors remain an optimistic view about Vietnam’s economy, so they continue to pour their money into stocks.

The general Statistical Office said from the beginning of the year, businesses in the country have exported about 36 tonnes of gold (worth about $1.3 billion). Thus, a large amount of money derived from gold is more supporting the economy, in which a part of this money is expected to be poured into stocks. On the other hand, because currently, the real estate market slumps, property investors are still holding the money, if they see a good signal of securities, a cash flow from this channel will also be poured in securities.

Huynh Anh Tuan a financial expert said that the concern from the debt crisis in Europe has descended and the China credit tightening to curb real estate “bubbles” has been neglected. In Vietnam, the domestic macro economy is fairly up, more cash flows are waiting, or when the lending interest rates drop as expected and the world economy becomes more stable, the stocks are expected to grow strongly.

Tags: Vietnam finance, Vietnam financial

Posted by VBN on Jun 29 2010. Filed under Banking-Finance, Stock. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry