Vietnamese stock market could miss year-end mark

By Minh Son   July 17, 2018 | 05:56 pm PT
Vietnamese stock market could miss year-end mark
A woman rides a bicycle past a stock exchange center in Hanoi. Photo by Reuters/Kham
A roller coaster performance and likelihood of further volatility could put the year-end target of 1,000 points beyond the reach of the stock market.

The benchmark VN-Index stood at 913.98 points at the end of the Tuesday morning’s trading session, a drop of almost 300 points – 25 percent – off the peak it had set in April.

Given the peaks it reached in the first quarter and the plunge from there in the second, experts are going back on gung-ho predictions they’d made earlier.

Bloomberg said last week that the VN-Index has now erased all of its 2018 gains and seen volatility surge to levels not witnessed in more than eight years.

Among the reasons being listed for investors withdrawing from the market are global economic fluctuations, trade wars, foreign investment outflows and profit-seeking selling of blue-chip stocks.

The Bloomberg report said that investor sentiment had reversed with the U.S. Federal Reserve increasing its basic interest rate, sending the dollar up and the Vietnamese dong down.

Foreigners began to leave the Vietnamese market soon after, and outflows only worsened with growing concern over consequences of trade frictions between the U.S. and China.

“The stronger dollar may continue to put pressure on foreign capital flows, which will cause the stock market in Vietnam to experience short-term fluctuations,” Hanoi-based Vndirect Securities Corporation said in its latest report.

A recent Reuters report also highlighted the trade war triggered by U.S. President Trump against China as a factor in Vietnam’s stock market downturn in Vietnam.

Investors have grown more nervous about the broader impact of trade tariffs on the global supply chain and economy, it said.

China was Vietnam’s largest trading partner last year. Vietnam relies heavily on China for materials and equipment for its labor-intensive manufacturing sector, while the U.S. is its largest export market.

As investors sell shares to hedge against the risk of dumping of Chinese export products such as textiles and furniture in neighboring markets like Vietnam, declining share values have led to margin calls in Vietnam’s heavily leveraged and relatively expensive market, spurring further selling, Reuters reported.

In the last trading session of 2017, the stock market had hit a 10-year high, reaching 984.24 points. It had not broken the 800-point barrier since 2008.

The good run continued in the first quarter of 2018, with the nation’s benchmark index, the VN-Index, growing 19.33 percent in the first three months of 2018, becoming the best-performing market in the world.

Then, in March, experts said the market was low-risk and investors were high on growth confidence.

Nguyen The Minh, a senior analyst at Saigon Securities Incorporation, had said then that “the VN-Index could reach 1,050 points in the short-term and 1,300 by the year’s end.”

Bao Viet Securities said then that the VN-Index could reach 1,182-1,187 in the coming sessions. RongViet Securities Corporation said the VN-Index will increase by at least 17 percent this year – 67 percent in a best-case scenario – meaning it could end the year somewhere between 1,170 and 1,640.

However, after crossing the 1,200-point mark on April 9, things did not look up for some time. In fact, in the second quarter, the market plunged 18.19 percent, making it the worst-performing market in the world.

Since then, it has not hit four figures again.

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