Stock market falls short of supports

The government’s new measures in favour of macroeconomic stability and inflationary easing are largely impacting the Vietnamese stock market

The government’s new measures in favour of macroeconomic stability and inflationary easing are largely impacting the Vietnamese stock market. Reporter Huong Ly is granted a face-to-face interview with Mr Le Trung Dung, Senior Manager of Research and Analysis Department, Saigon – Hanoi Securities Joint Stock Company (SHS), on this matter.

The Vietnamese government places top priority to stabilise macro economy and curb inflation. How has this advocacy affected the stock market?

The Vietnamese Government has adopted many resolute measures in favour of macroeconomic stability and inflation taming, particularly the decision to bring down loans for nonmanufacturing fields like securities and real estate. This policy is the main cause for a continuous sharp drop of stocks on both Hochiminh Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX).

In my opinion, the market lacks strong enough supports to rebound. In addition, investors become more cautious with negative news like rising interest rates or debt collection in nonmanufacturing fields. According to the schedule, the ratio of credits for nonmanufacturing fields will be brought down to 22 percent of total loans as of June 30. Meanwhile, interest rates and fees for securities collateralisation soar to 24 percent per annum; and inflation estimated to climb 2 – 2.5 percent in May. These factors may bring the market from bad to worse. In the event that macro risks remain persistent, investors now tend to wait for data to have a more accurate assessment of policy impacts.

It is obvious that low liquidity in recent months is generating tremendous pressures on the stock market. What is your opinion about this?

Actually, the traded volume has dropped sharply in recent months. The demand outweighed the supply on HNX but the correlation is opposite on HOSE. Cash flows are channelling into penny stocks with sharp value loss on HNX but the buy-side still wants lower values. On May 15-16, the market liquidity slightly improved but share values dropped more strongly in these sessions. The market closing at the low of the day showed that selling pressures outweighed. Investors are still cautious with bottom fishing strategies.

In the coming time, the attractiveness of interest rates will weaken cash flows into the stock market. Given existing inflationary and interest pressures and their adverse impacts on listed companies, investors will move with caution. Cash flows tend to go into banks as this is becoming a safer investment channel with wider margins.

In the past three months, a majority of shares dropped sharply. The HNX-Index is verging on the all-time low of 76 points created in February 2009. Do you think there will be a short-term recovery when shares are deemed cheap?

In the latest one month, real estate and securities blue-chips with good business results in the first quarter still gained ground. However, slumps of blue-chips like HAG, PVD, FPT, SJS and SSI reflected the eroding patience of investors. The VN-Index is to test the 450-point support.

On the Hanoi bourse, a technical rally is expected as penny stocks have gone down very deeply. The 80-point sentimental support is expected to spur the liquidity next week. Accelerating declines of the HNX-Index toward the close of the trading day signalled weak investor sentiment.

Foreign investors have bought net since 2010. What are your viewpoints on foreign investors’ move?

Foreign investors are net buyers for months. They purchased a lot but sold a little. They are very keen on medium-priced blue-chips like CTG, PVF, DPM, VCG, BVS and KLS. The market is expected to receive more funds from ETF Fund following the information that VCB is permitted to float 1.6 billion shares in the coming time. Bank shares have risen significantly. Foreigners are also interested in equities on Hanoi bourse where values plummeted steeply in the past months. The devaluation of the dong against the US dollars increases funds in Vietnamese dong for foreign investors. Given current attractive values, foreign capital is expected to flow into the Vietnamese stock market in the coming time.

What is your recommendation for investors at present? What stocks are hot picks, in your opinion?

I maintain my standpoint that this is a good time for long-term investments. Short-term investors should wait for better macroeconomic data to make decisions. With short-term investment perspective, investors should wait calmly signal improvement of macroeconomic factors. For those investors not buy shares in recent times, the track market performance, especially with the CP had time to accumulate a relatively long, gradually to buy, or buy when they begin to break through limit the risks as well as the holding period of shares. I recommend that investors pay attention to stocks with a long time accumulation or stocks starting the uptrend. – VCCI

Tags: vietnam stock, Vietnam stock market, VNindex