Strong foreign buys save market from further plunge

Monday, April 28, 2008
The VN-Index fell for five consecutive sessions last week, losing a total of 19.04 points to close on Friday at 515.88. Trading volume averaged under six million shares per day, with value reaching a cumulative VND1.32 trillion (US$82.5 million), both figures comparable to the previous week.

An analyst from Kim Long Securities Co, who asked to remain anonymous, said that the VN-Index was saved from plunging further last week by the net buying of foreign investors.

Foreign investors last week picked up a total 8.73 million shares, worth nearly VND508 billion ($31.75 million). This accounted for about 38 per cent of the market’s entire value during the week. Meanwhile, they sold only 952,670 shares, totalling about VND60 billion.

So far this month, they’ve spent VND2.18 trillion to purchase 35.3 million shares, while selling only 7.8 million shares, worth VND522 billion.

"It’s notable than foreign investors have bailed out the market and kept it from plunging further," said the analyst. "However, these days may be numbered because, if the market continues its descent, overseas investors will also likely sell shares to cut losses."

The market slowdown has also had a big impact on domestic brokerage houses, who have seen their income from trading commissions dry up. To halt further dilution of a shrinking market, representatives of the Ministry of Finance and the State Securities Commission held a closed-door meeting last week in which they decided to halt granting operating licensces to new brokerage houses and fund management companies.

After the meeting, Deputy Minister of FinanceTran Xuan Ha said concerned agencies would seek to restructure to the stock market to ensure sustainable development of both the stock exchange and the over-the-counter (OTC) market.

Authorities would also get tougher on violations by brokerages to create more favourable conditions for the market to develop strongly, he said.

The establishment of a formal bond market was also still in the works, Ha indicated.

In Ha Noi over the past week, the Ha Noi Securities Trading Centre witnessed four down sessions before the HASTC-Index rose on Friday. For the week as a whole, the index lost 8.38 points to close at 168.95.

Total volume for the week on the northern bourse was 14.67 million shares, with a value of VND588 billion ($36.75 million). (VNS)