(31-03-2008)
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| Investors eye the board at Habubank Securities in Ha Noi. Markets rallied modestly for three consecutive days last week. — VNA/VNS Photo Tran Viet |
HA NOI — With the a tighter daily trading band announced last Tuesday and put into effect on Thursday, shares rallied modestly for three consecutive days last week, with many market watchers saying that confidence was gradually returning in the market.
The VN-Index closed on Friday at 512.70 with most codes hitting their ceiling price. This was off last week’s close of 545.68.
Over the course of the week, eight codes saw gains, while 136 declined and nine remained unchanged.
Trading value on the week was shy of VND2.6 trillion on a volume of only 50.8 million shares, 40 per cent less than volumes in the previous week. The loss was blamed on the tighter daily trading band’s restriction on market liquidity.
The VN-Index fell below 500 at the close of trading on Tuesday morning, ending the day at only 495.02, spurring the State Securities Commission to institute the tighter trading band as a measure to stanch further losses.
The commission narrowed the daily trading band from 5 per cent to one per cent, plus or minus, on the HCM City Stock Exchange, and from 10 per cent to 2 per cent at the Ha Noi Securities Trading Centre.
On Wednesday, the last day of trading without the restricted trading band, the VN-Index broke back above 500.
This, and the subsequent two days of gains, surprised many analysts who had expected investors to hastily sell off their shares. Only foreign investors behaved as predicted, becoming net sellers on Thursday and Friday.
In the history of Viet Nam’s stock market, the daily trading band was changed five times between 2000 and 2002. In June 2001, the State Securities Commission loosened the trading band from 2 per cent to 7 per cent. The VN-Index rallied for six consecutive sessions before plummeting to a record low of 203 points.
The commission once again narrowed the trading band from seven per cent to two per cent in October 2001 with a view to curbing inflation and making investors feel more secure. The adjustment caused many investors to simply hold onto their shares, resulting in low trading volume, and it took the VN-Index 19 consecutive trading sessions to climb back nearly 300 points.
To ease the oversupply of shares on the stock market, the State Bank has also required commercial banks not to sell off shares they hold as collateral and help reduce losses they would suffer if they sold.
Decreasing the number of shares on the market and increasing compulsory reserve requirements imposed on commercial banks, if handled smoothly, would also help ensure the payment capacity of banks and balance the supply and demand of shares. — VNS
