VietNamNet Bridge – In principle, the recovering stock market would help businesses mobilize capital from the public more easily and cheaply. However, the current stock price upward has raised worry than joy.
Analysts have pointed out that the stock prices have been increasing not because the national economy has been improved and the production has been recovered, but because the cash flow has nowhere to go to, except the stock market.
SBV takes actions, stock market gets benefits
The report released on April 18, 2012, by Ban Viet Securities Company showed that in the first quarter of 2012, the State Bank of Vietnam pumped 190 trillion dong into circulation, by using 130 trillion dong to buy 6.23 billion dollars for the national foreign currency reserves, 30 trillion dong for payment support and 30 trillion dong to refinance weak banks.
During the same time, the central bank withdrew 70 trillion dong only through the open market operation (OMO) and 55 trillion dong by issuing bonds.
As such, it is estimated that some 60 trillion dong have flown into the banking system from which the money would go to the national economy through the most investment channels.
A big amount of cash has been flowing into the stock market, which is considered the most attractive investment channels in the current circumstances.
The third week of April 2012 alone witnessed the total trading value reaching 3000-4000 billion dong per trading session, the figure which was 5-7 times higher than that at the end of the last year.
The cash has been flowing to the stock market, because the credit to the production and business sectors has been decreasing. Meanwhile, the bank deposit interest rates have become less attractive after the central bank instructed commercial banks to lower the ceiling interest rate to 12 percent per annum.
Buying gold proves to be not a good choice for now, especially when the international gold prices have been decreasing steadily in the last many days. The domestic price has dropped even more sharply due to the strict regulations, now hovering around 42 million dong per tael.
High expectations have been put on the real estate market. There have been signs showing that the market has warmed up right after the central bank announced the loosening of the credit policies.
Nevertheless, the overly high prices of real estate products and the low demand of the market have both made the recovery go slowly. Meanwhile, commercial banks, after many years of applying loosened rules on funding real estate projects, have become more cautious in disbursement.
In such circumstances, the recovery of the stock market in recent trading sessions has attracted investors, who have idle money. It seems that securities investments allow investors to make big profit of 10-20 percent easily and quickly, just after one or two weeks.
Production stagnates, stock prices still increase
Though the stock prices keep rising, analysts have warned that the upward trend may not be sustainable, because the stock index has been increasing “reluctantly.”
The problem is that the stock prices have been increasing not because enterprises’ operation has recovered, but because investors have nowhere to invest in.
The interbank overnight interest rate has dropped to 5 percent, while the interest rate of 28-day bond had dropped to 9.5 percent by mid April 2012.
The figures show that banks have capital in excess, while they cannot push up lending at high interest rates. The credit decrease of 1.96 percent in the first quarter of 2012 proved that money does not flow to the production and business sectors.