Investor confidence key to restoring market: experts

Monday, May 19, 2008
The stock market came close to grinding to a halt last week, as both the HCM City and Hanoi exchanges saw shriveling volumes and shrinking indices.

On the HCM City Stock Exchange, the VN-Index began the week on Monday by dipping below the psychological barrier of 500 points to close at 492.04. The downtrend continued throughout the week, with the Index falling to 460.04 at the end of the day on Friday.

The market saw only one or two gainers per day, if any, with most shares plunging to their floor prices and even greater damage limited only by the tight daily trading band of 2%.

Trading volumes were abysmal, with total volume for the week a sluggish 15.6mil shares, only half of the previous week's figure. Foreign investors accounted for about 4.7mil of the total.

Market turnover for the week reached only VND658bil (US$41mil).

Friday saw some recovery in volumes, with some renewed foreign investor interest, but it wasn't enough to stem the tenth straight session declines in the VN-Index, a ten-day total loss of 62.32 points or 13.42%.

Among codes with the highest trading volumes for the week, Phu My Fertilisers (DPM) led with nearly four million shares traded. No other codes saw volumes in excess of one million. Following DPM as most-active share was Sacombank (STB) with some 684,000 shares traded.

By mid-week, investors were talking openly of a possible market freeze, fueled by skittish domestic investors and global economic problems, including soaring oil prices and fears of high inflation and slower economic growth. Many seemed thirsty for fast measures from authorities.

The director of the State Securities Commission's Market Management Department, Nguyen Son, said on Friday, without disclosing further details, that the Government would make policy decisions within the next few days.

According to Viet Nam Association of Financial Investors general secretary Nguyen Hoang Hai, investor transactions played an important role in stimulating stock market liquidity, and liquidity was the most important factor in helping the market develop stably.

But the market was being greatly affected by investor psychology, said financial analyst Nguyen Quang A, a former chairman of VPBank.

"The liquidity of the stock market has decline for the past three months although shares prices have become cheap and far below their real values," said Hai. "To recover market liquidity is to restore market stability. This will require strong measures to restore investor confidence and increase demand for shares."

In the northern market, the HASTC-Index lost a total 14.49 points, or 9.4%, on the week to close Friday at 139.74. Trading turnover was VND217.31bil ($13.6mil) on a volume of about 6,7mil shares. (VNS)