Stock market might get back on its feet – SSC official

The benchmark VN-Index fell 45 percent this year.
The stock market might rebound as a result of a series of measures designed to boost the exchange, head of the State Securities Commission’s Market Development Department Nguyen Son told Thanh Nien.

As of next Monday, the intraday trading bands at the Ho Chi Minh City Stock Exchange (HoSE) will be increased to 2 percent and at the Hanoi Securities Trading Center (HASTC), from 2 to 3 percent.

Why didn’t the State Securities Commission (SSC) widen the bands by 3 or 4 percent, rather than just 1 percent? Will the new margin increase liquidity?

Nguyen Son: Widening the intraday trading bands is simply an administrative and temporary intervention that depends on the stock market’s reactions.

SSC will continue to widen the bands further when the stock market becomes more stable.

In the past, SSC adjusted the bands many times.

For instance, when the stock market was rising from 2000 to 2001 or receding in the following two years, we used five, seven and three percent bands respectively.

Widening the bands at the HCMC and Hanoi stock exchanges by 1 percent is appropriate at the moment.

But we can not say by how much a percent liquidity will be increased as the result since this also depends on market reactions.

How will SSC react if the stock market goes down after the trading bands go up?

Adjusting the daily trading bands is only one of a series of solutions designed to revive the stock market.

Others include encouraging share repurchases and submitting to the government a special stock exchange plan for the State Capital Investment Corporation.

The State Bank of Vietnam (SBV) will also buy foreign currencies to ensure an adequate supply of dong, develop numerous loan plans and work with the Vietnam Banks Association to instruct commercial banks to halt selling mortgaged shares of credit and repo contracts.

If the market does not respond positively, we will surely have to think of stronger measures.

Do you think the wider trading bands will encourage share dumping?

If the market shows positive signs, I don’t think banks will sell mortgaged shares.

If banks encounter a liquidity shortage when they stop selling these shares, SBV will buy bonds or stocks from banks at the rediscount interest rate of around 9 percent per year.

Listed companies have also submitted audited reports on their financial conditions last year which were very positive.

This is an encouraging sign.

Another favorable sign is that the price-to-earnings ratio is only around 12, which is good.

Analysts say shares with the ration of less than 20 or between 20 and 25 are good to buy.

The stock market seems to be rebounding and if the public is again optimistic about it, banks will be unlikely to speed up selling mortgaged shares.

Some say foreign investors are withdrawing from the local stock market. Is that true?

Yes, there is a rumor to that effect.

But I am sure foreign investors are not withdrawing their investment as we have looked into the accounts of foreign investment funds.

What is happening is only that some investment funds are selling some shares to buy other shares or selling shares to buy bonds to take advantage of the high interest rates offered by banks and a strengthening dong.

Stock market operations also show that foreign investors are not leaving.

In recent sessions at HoSE and HASTC, foreign investors have placed many more buying orders than selling ones.

For instance, in the four sessions after the SSC lowered the daily trading bands temporarily in respond to the sinking stock market, foreign investors placed buying orders for a total 32.2 million shares while they placed sell orders for only 4.6 million shares.

Nonetheless, the fact that foreign investors actually bought 1.88 million shares in these sessions while succeeding in selling all the 4.6 million shares they wanted to sell made some worry.

But there is a reason that might explain why the actual purchase by foreign investors was so low.

When the daily trading bands were lowered, domestic stock investors were optimistic and placed buying orders at the maximum prices.

Foreign investors, on the other hand, placed orders to buy shares at the market prices or a little higher.

If the numbers of selling and buying orders were equal, almost all buying orders from domestic investors were matched.

So at first glance, foreign investors seemed to be leaving as they actually sold more than they bought.