Fire sales on both of the nation’s bourses drove indices down for four consecutive sessions last week.
The higher prime rate and tighter credit policies instituted by the State Bank had choked off flows of capital to the market and triggered investor fears of a repetition of last year’s market plunge, when the VN-Index dropped below 300, said Au Viet Securities Company Deputy Director Le Anh Thi.
On the HCM City Stock Exchange last week, the Index dropped a whopping 10.26 percent of its value over the course of last week, closing on Friday at just 444.16.
Volumes were also way off, falling by 11.85 percent and averaging 35 million shares, while the average daily value of trades dropped by 15.43 percent to just VND1.37 trillion (US$74.05 million).
On the Ha Noi Stock Exchange, the HNX-Index plunged by 12.17 percent from the previous Friday to just 139.99.
Daily volumes on the northern market averaged just 16.4 million shares, worth an average of VND504 billion ($27.2 million), a decrease of 24.66 percent from the previous week’s average.
Tan Viet Securities Company Deputy Director Hoang Xuan Quyen said capital inflows were being dried up by constraints on margin trading and financial leverage by brokerages and banks, as well as reduced source of credit overall for securities investors.
"Tighter sources of capital for securities trading has coincided with the market lacking any strong supporting information about the economy, creating a downward spiral of low volume and liquidity," Quyen said at a conference last Friday entitled Viet Nam Stock Market Prospects in 2010.
Pressure to sell shares pledged in collateral to earlier loans now coming due had also made the current, steep correction of the market inevitable, said Viet Capital Securities Co deputy director Nguyen Quang Bao.
"While the economy is improving and is devoid of any negative signals except for recent monetary policy adjustments, investor obsessions with another downturn is driving the market downturn," added Wall Street Securities Company Vice President Pham Duc Long.
Investors were overreacting to the policy changes, agreed Thi, noting that the current context was far different from last year’s, when the world was gripped in a financial crisis and inflation had spiked to over 20 percent.
"The Government drew a lot of experience from the past year and responded more quickly in terms of monetary policy management," said Thi. "Obscured by pessimistic psychology, investors are overlooking the positive signs."
Vu Huu Dien, Chief of Portfolio Management for the Dragon Capital Fund, agreed that the nation’s stock market, while dominated by individual investors who make up to 80 percent of the market, was being unduly influenced by the unstable sentiments of short-term, speculative investors.
FPT Securities Company analyst Dao Viet Anh forecast several rising sessions and increased volume in the coming week, once shares fell to the resistance level of 435. The VN-Index would then range between 435 and 480, he predicted.
While he expected a modest market recovery once companies began releasing their end-of-year earnings data, Anh said short-term investors should not join the market at present, advising only mid- to long-term investment in the soundest stocks with good basic indicators and future growth potential.
Le Le Hang, Director of Analysis and Investment Consulting for Saigon Securities Inc, recommended investment in such sectors as raw materials, seafood, real estate, and banking.
Foreign investors, meanwhile, were net buyers in HCM City last week, although on a reduced net buy of just over 2.5 million shares, worth a net total of VND146.4 billion ($7.9 million).
They were net sellers in Ha Noi, unloading a net of one million shares, worth a combined VND35.9 billion ($1.9 million).