Low trading volumes hint at market freeze

Friday, May 16, 2008
The HCM City Stock Exchange continued to see shares prices battered in almost all codes yesterday, while trading volumes continue to hover at almost record lows.

The VN-Index slipped another 8.83 points, or 1.86 per cent, on the day to close at 466.67. In eight-straight sessions of declines, the Index has lost an overall 55.69 points, or 11 per cent of its value.

Volume in yesterday’s trading was just over two million shares, worth around VND84 billion (US$5.2 million). Foreign investor trading was also modest, with 757,000 shares bought and 282,860 sold.

Saigon Securities Inc (SSI) saw a volume of only 6,000 shares yesterday, when it has historically been on the stocks with highest liquidity, posting transaction volumes of millions per day as recently as a month ago.

Of 154 listed codes on the exchange, only two codes were gainers yesterday while fully 150 hit the floor. Buying was so depressed that 99 per cent of buy orders were matched immediately, while some investors couldn’t sell shares even after offering them at floor prices.

"Many people don’t even bother to come here anymore to observe market developments," said Pham Ngoc Linh, an investor with SeABank Securities Co. "Without even looking, they already know that share prices are going to keep falling."

According to the State Securities Commission, the problems involving the stock market were not only with the market but also related to the economic situation, so measures supporting the market had to wait on broader Government decisions on how to manage the economy.

The commission held a meeting on Wednesday discussing measures for the market and submitted its report to the Government for consideration yesterday. If approved, some measures would be applied instantly, the commission said.

Meanwhile, investors worried that current market developments might send the market into a long-lasting freeze similar to that in 2002-06. The VN-Index then fell from 500 points to around 130, and the market remained level for most of the four-year period.

"There is little chance that the market will freeze," said financial analyst Nguyen Quang A, former board chairman of VPBank.

"The stock market is playing a very important role in the economy with total capitalisation reaching 45 per cent of national GDP at the beginning of the year, so the Government has to take necessary measures to keep it stable and healthy," he said.

"The market has become a familiar investment channel for the public as well as a reliable channel for companies to raise capital. The people’s knowledge of the stock market has also improved greatly. They won’t abandon it."