Stocks decline to pull indices down

Half of the listed stocks on the HCM City market fell this morning, causing the VN-Index to fall 1.44 per cent to close at 478.29.

Trading volume was 9.6 per cent lower than last Friday, with 67 million shares changing hands. Value remained brisk at VND1.6 trillion (US$76.2 million).

Among the 155 decliners, 15 stocks dropped to their floor prices, including property developer Vincom (VIC), down VND4,500; Bao Viet Holdings (BVH), down VND3,000; Dry Cell and Storage Battery (PAC), down VND2,500; Construction Co No5 (SC5), down VND2,000; and Sacombank Securities (SBS), down VND1,600.

Some stocks managed an advance, including Tan Binh Import-Export (TIX) and Phu Nhuan Jewellery (PNJ), each up VND1,700; Savimex Economic Corp and Import -Export (SAV), up VND1,300; Chuong Duong Beverage (SCD), up VND1,200 and Traphaco Pharmaceutical (TRA), up VND1,000.

In Ha Noi, the HNX-Index dropped 2.51 per cent to 116.70, with decliners outnumbering advancers by 218 to 88.

Volume totalled 47.2 million shares, worth VND920.4 billion ($43.8 million).

Several blue chips fell, including Kim Long Securities (KLS) and PetroVietnam Construction (PVX), each down VND100; PetroVietnam Insurance (PVI), down VND200; PVL, down VND600; and Asia Commercial Bank (ACB), down VND800.

Eight stocks hit their ceiling prices, with Lam Dong Foodstuff (VDL) achieving the highest increase of VND3,300; Viet Nam Construction-Import-Export (V21), rising VND1,700; Dzi An Manufacturing Public (DZM), rising VND1,600 and Dong Anh Ceramic (DAC), rising VND2,400.

Vegetable retail price up as bad weather

Bitter cold spells in recent days have badly affected agriculture leading to a shortage of fresh vegetables and an increase in retail prices in Ha Noi.

The volume of available vegetables has reduced significantly in the last two days at the North Thang Long and Kim Nguu wholesale markets.

Nguyen Van Chuc, a wholesaler, said the weather was to blame for the bad harvest and the subsequent shortage of vegetables.

The price of vegetables had surged by 20-30 per cent compared with before the cold spells, Chuc said.

At present, the price is at VND4,000 per tuber of kohlrabi, VND8,000 per bundle of water dropwort, VND6,000 per bundle of watercress, VND5,000-7,000 per kilo of cabbage and VND7,000 per kilo of tomatoes.

Le Thi Huong, a retailer from Ngoc Ha Market, said customers were being forced to pay higher prices because retailers were at the mercy of wholesalers. She said the price would decrease slightly when the weather got warmer.

However, a retailer on Truong Dinh Street said she could not predict what would happen to the price in the near future, due to the likelihood of hoarfrost.

Vegetable prices have also increased by 5-10 per cent in supermarkets.

Most vegetable traders expected the price to increase due to high demand for the Lunar New Year.

Meanwhile, meat and seafood retailers said prices had remained unchanged but were likely to rise for the same reason.

Road maintenance fund proposed

The Government's annual outlay for road maintenance only meets 60 per cent of the need, the Viet Nam Road Administration has said.

Viet Nam has 279,927km of roads, with a kilometre normally needing around VND164.5 million (US$8,000) for maintenance.

Deputy Minister of Transport Ngo Thinh Duc told Lao Dong (Labour) newspaper: "For their mountain terrain, provinces in the Central Highlands and north-western regions ask for even more.

"In the Cuu Long (Mekong) Delta, roads deteriorate quickly due to water."

This year severe floods and storms destroyed 70 roads.

Duc also pointed out that with the number of vehicles skyrocketing, most roads, which are not ideally maintained due to paucity of funds, are deteriorating faster than usual.

To resolve the problem, he suggested creating a fund for road maintenance and enlarging the system to prevent overloading of vehicles which too affects roads.

The fund will be established at both the central and local levels and money for it will be sourced from the Government, toll, and tax on petrol.

In the next five to 10 years, when all toll stations are closed, the money will come only from petrol taxes.

But the Ministry of Finance has been lukewarm about this proposal, saying many people buy petrol for operating machinery and not vehicles.

Deputy Minister of Finance Do Hoang Anh Tuan said: "The Ministry of Transport should study the system in developed nations for raising money for road maintenance based, for instance, on how many kilometres a vehicle runs."

Besides, the tax on petrol and oil is set to be abolished on January 1, 2012, when the Environment Protection Law will take effect, imposing a levy of VND1,000-4,000 per litre.

Coal prices, electric rates to stay stable, vows ministry

Coal and power prices would not go up in the first quarter of 2011, said the head of the Ministry of Finance (MoF) Price Management Department, Nguyen Tien Thoa.

The ministry had taken the decision because prices of these two utilities often had a knock-on effect on other goods and services, which could lead to an unwanted general price rise, said Thoa at a press conference on Friday.

"Price fluctuations often occur at the end of the year owing to increased demand. Therefore, from now until early next year, MoF will focus on resolving difficulties in production. We want to balance supply and demand and to avoid any shortages,essentially in underprivileged areas."

According to the General Statistics Office, the Consumer Price Index (CPI) is likely to hit 11 per cent this year. Thoa said weaknesses of the economy had played a part in the increase.

"Growth depends mainly on increased investment but investment remains inefficient and competitiveness is low," said Thoa at the press conference.

He added that the Ministry of Finance (MoF) had taken numerous steps to help stabilise prices.

"For example, MoF has instructed localities to use local standby budgets to provide non-interest capital for enterprises that trade reserved commodities; this will allow them to sell items at prices 5-10 per cent lower than the usual market price," Thoa said.

Thoa added that MoF had informed localities to delay the purchase of non-essential items to minimise demand-pull inflation.

"These classic solutions are significant if we want price stabilisation."

MoF's recent inspections in HCM City and several other southern provinces revealed that these localities had already stockpiled enough essential goods to meet local needs. Localities had also set up sales and distribution networks to better service underprivileged areas.

Thoa added the MoF had provided financial support to help regions facing severe weather to recover short-term vegetable crops and had urged local farmers not to export pigs, which were essential for the New Year holiday.

Forecasts predicted further economic recovery next year, which would lead to the increased demand for production inputs, and have an impact on prices.

"To that end, MoF will continue reforming the market-oriented pricing management mechanism, and respect enterprise and trader's rights to set their own prices and forms of competition by replacing Pricing Ordinance by Pricing Law," said Thoa.

"Next year, implementation of the market price scheme should be incorporated into the completion of the goods and service logistics system. We should also strive to reduce production costs and implement policies which ensure underprivileged households have access to basic social services including education, healthcare, and housing."

Ensuring supplies

Deputy Minister of Industry and Trade Ho Thi Kim Thoa discussed measures aimed at market stability and ensuring adequate supplies of essential goods during Tet in meeting with officials from the HCM City Department of Industry and Trade last Thursday.

Department deputy director, Le Anh Dao, said firms had stockpiled 15,800 tonnes of rice and sticky rice, almost twice the quantity originally planned for. They had also put aside 9,800 tonnes of sugar (233 per cent of the plan), 14,500 tonnes of meat, 5,200 tonnes of fruits and vegetables; and 55 million eggs.

At present, the Co.op Mart supermarket chain has stocks valued at 30 per cent more than their planned value.

And it isn't just firms that have signed up for a city price stabilisation programme that are stocking up; other companies are preparing for the year's biggest festival which falls in early February this time.

German supermarket chain Metro has food stocks worth VND1.1 trillion (US$56.4 million).

French supermarket Big C also has large stocks and has promised to keep prices and supply relatively stable for the next two months.

The MoIT has instructed the Department to continue working closely with firms to keep prices of goods like petrol, cement, and food stable during Tet.

Besides the eight essential goods targeted under the programme, authorities should also ensure adequate supply of cakes, candies, and jams for the Lunar New Year, Thoa said.

He said cities needed to ensure that all markets sell goods covered by the price stabilisation programme.

The Department of Transport should also give rush hour priority to vehicles delivering to supermarkets and shopping malls.

FDI disbursements to remain stable

The registration of new foreign direct investment (FDI) is not expected to increase considerably and will remain at a level of about US$11-12 billion, predicted the University of Economics and Business's Centre for Foreign Investment Studies.

Cumulative FDI would likely reach $320 billion by 2015, with $145 billion of it disbursed, the centre said – indicating that the gap between registered and disbursed FDI would be double the current figure.

Top priority in 2011should therefore be given to fostering FDI disbursement to better narrow this gap, said centre director Phan Huu Thang.

FDI disbursements during the first 11 months of this year increased by 9.9 per cent over the same period last year, reaching $9.95 billion, while new FDI dropped by 40 per cent to $13.3 billion, according to the Foreign Investment Agency (FIA).

Some Viet Nam's traditional investment partners, such as South Korea, Taiwan, the EU and the US, had cut back on overseas investments since the economic crisis, said Thang, who is also FIA's former director.

Meanwhile, he added, Viet Nam continued to experience challenges in attracting FDI, including cumbersome administrative procedures, inadequate infrastructure and electricity shortages.

Thang predicted that FDI in the real estate sector – once a highly attractive sector – would slow next year due to an oversaturated market and the slow implementation of foreign-invested projects already registered, especially in the nation's southern region. However, he expected that investment in construction and manufacturing would continue increasing.

In the first 11 months of this year, the processing and manufacturing sector attracted the largest share of FDI, accounting for $4.37 billion.

Deputy PM demands rapid rumour rebuttals

Deputy Prime Minister Hoang Trung Hai has ordered concerned State agencies to develop a quick-response system for releasing official information and decisions relating to economic policies to the mass media.

The move is aimed at preventing the types of rumours that have had negative impacts on the stock market and the economy in recent months.

The head of the Government Office Nguyen Xuan Phuc emphasised the important role of the mass media to disseminate information accurately to maintain economic stability.

The Ministry of Finance, the State Bank of Viet Nam, the Ministry of Industry and Trade and the Ministry of Information and Communications have been told to propose a scheme to the Prime Minister next month.

Hai has also asked ministries, industries and local authorities to promulgate timely and transparent information on decisions and regulations relating to monetary policy, foreign exchange, interest rates, price controls, and other sensitive economic issues.

Deputy Minister of Information and Communications Nguyen Thanh Hung, while lauding the efforts of the mass media to promulgate economic policies in the past, urged leaders of press organisations to further improve the quality of information.

Economy weathers inflation, forex storms

November was characterised by positive economic development but accelerating inflation and a volatile foreign exchange market, according to a monthly report of the Viet Nam Asset Management Ltd (VAM).

VAM is a fund management company that engages in public and private equity investment and advisory services in Viet Nam.

The national Gross Domestic Product (GDP) in November was 7.24 per cent, resulting in a full-year growth of about 6.7 per cent, compared to last year's 5.23 per cent, according to the report.

Overseas remittances will likely reach US$7.2 billion in 2010 compared to $6.6 billion in 2009, while capital inflows from disbursed foreign direct investment and official development assistance were also improving.

The most significant factor was the country's full year of export growth reaching 23 per cent, nearly quadrupling the 6 per cent target set for the year by the Government.

Meanwhile, import growth dropped between 19 and 20 per cent.

VAM experts predicted the balance of payments would likely be a $2 billion deficit this year, down from last year's deficit of $8.8 billion.

In addition to such positive changes in the economy, policy markers and market participants were still concerned about increasing inflation and foreign currency fluctuations.

In November, the Consumer Price Index increased 1.86 per cent from October, marking a third month-to month increase above 1 per cent, after six months of being kept under this threshold.

The CPI increase in November brought the CPI index this year to 9.58 per cent and about 11 or 12 per cent by the year-end.

The foreign exchange market was volatile during November, with the greenback being offered at 21,500 dong per dollar in the unofficial market at the month-end, 10.25 per cent higher than the official ceiling band of VND19,500.

This occurred despite the Government's announcement early that month that it would allow the State Bank of Viet Nam (SBV) to use foreign reserves to inject dollars into the market. SBV said it had no plans to further depreciate the dong until the Lunar New Year.

Strong rallying in the local gold price in the past few months has been a major cause for the increasingly volatile forex situation, which led to panic in the market.

After the SBV's decision to allow gold imports early this November, local gold prices started to cool down to VND35.9 million per tael (a tael was equivalent to 1.2556 troy ounce) at the end of the month, compared to its all-time record at VND38.2 million per tael in mid-November.

As the GDP growth target for this year was achieved, VAM analysts said the Government's focus now would move to curbing inflation and cooling the forex and gold markets to stabilise the economy.

The Government implemented successive tightening monetary measures in November.

This included raising interest rates by 1 per cent annum (Vietnamese dong's base interest rate to 9 per cent per annum, refinancing interest rate to 9 per cent per annum, discount rate to 7 per cent per annum, and overnight rate to 9 per cent); and removing the cap on both deposit and lending rates for banks.

Toward the end of November, many banks increased the deposit rate for the dong to 13-14 per cent per year.

Some smaller commercial banks even offered borrowing rates of 14.5-15 per cent per annum in an attempt to retain their depositors and mobilise more capital for their increasing year-end lending demand.

However, the desired effects on inflation of these tightening policies would likely to be seen only from next year, they said.

Evaluating the local stock markets, VAM experts said the VN-Index ended November at 451.59, down 1.5 per cent compared with last month.

During the month, they saw a divergence in the market trend, hitting the trough at mid-month and then significantly picking up during the last week of the month.

Additionally, the low average liquidity rate might indicate that retail investors were still cautious about the recovery of the equity market over the short-term.

According to VAM, investors were not too bullish about the market in the short-term, but equities came down to an attractive level.

The negative macro-economic situation has mostly been priced in, so it might be a good time for investors to consider accumulating stocks.

VAM suggested that the Government be more transparent and proactive in implementing its monetary policies in order to restore investors' confidence and to help the equity market sentiment.

Stocks in consumer staples, oil&gas and materials, would continue to attract investors' attention. For the long term, materials, real estate and banking sectors would become preferred.

In this time of volatility, they advised investors to keep close tabs on macroeconomic developments for signs of recovery and stability before jumping in to the market.

Source: VNS