It’s Unwise To Go Blind
By Nguyen Quan
What happened to Vietnam’s stock market between February 31 and March 6
As a result of improving liquidity, the overnight interest rate on the Interbank lending market has dropped significantly. As February came to a close, the annual rate fell to 6-7% compared with 8.5% in January. The current situation is in dire contrast with that a year ago when smaller banks had to borrow at a 16-17% overnight interest rate. Lower overnight rates have also supported the liquidity of smaller banks.
Furthermore, Vietnam’s trade deficit in the first two months falling to US$628 million, a 34.5% year-on-year decline, has helped paint a brighter macroeconomic picture. Meanwhile, the Government has issued a directive asking the central bank to gradually revise down interest rates to an appropriate level in support of the stock market.
Since early this year, a considerable number of both domestic and foreign stock investors have opened new accounts in Vietnam. According to the Vietnam Securities Depository (VSD), by the end of last month, more than 15,600 foreign investors had opened their accounts. Of these, more than 1,700 are institutional investors and almost 14,000 are individual. In February alone, 44 new foreign investors, including 22 institutional and 22 individual ones, were given stock transaction codes by the VSD.
In February, foreign investors net-bought stocks worth US$58.3 million, accounting for three-fourth of net investment committed by the foreign side on both exchanges.
Relying on the above good news, investors believed that the bullish market on this week’s first trading day was something expected. Investors soon found it hard to buy back what they had sold. Idle money kept by the people seemed to have anchored in the stock market, an enticing investment channel in 2012.
Objectively speaking, however, analysts say transactions during the week’s first trading session went somewhat astray, triggered by mawkish sentiment on the first day when afternoon trading was introduced. Rumors that the long-held 14% interest rates would be cut by one or two percentage points might have turned some overzealous investors really crazy.
On Monday, almost all stocks rose to the ceiling when investors tried to buy whatever available on the market regardless of business performances of listed companies in question, even those at risk due to cumulative losses in three years.
Therefore, a plunge on Tuesday helped cool off some overheated investors and save more time for them to think about their transactions instead of indiscriminately taking any offer.
At the close of the February 6 trading session, the VN-Index lost 12.21 points or 2.67% of its value, to stand at 445 points, with almost 154.5 million stocks traded worth more than VND2.16 trillion. On the Hanoi exchange, the HNX-Index shed 0.58 point, or 0.77% of its value, to stand at 75.2 points, with 183.11 million stocks traded, worth over VND1.65 trillion.