Fake news, rumors besiege stock market
Lieutenant General To An Xo, Chief of the Secretariat of the Ministry of Public Security, said the content implied that some individuals who are representatives of listed companies are going to be arrested and prosecuted, thus leading to adverse effects to the stock market, causing losses to the economy and harming the prestige of individuals, institutions and investors.
The move by the law enforcement agencies was taken after Deputy Prime Minister Le Minh Khai signed Telegram No311 last week sent to ministries and branches on measures to stabilize the stock market and the corporate bond market.
Khai asked to heavily sanction those disseminating false information, which can cause negative effects to the operation of the market.
The document was released to help reassure the market.
After police decided to commence criminal proceedings against Trinh Van Quyet and Do Anh Dung in the FLC and Tan Hoang Minh case, some personal Facebook pages with a high number of followers posted information implying that the managers of some other companies were about to be prosecuted as well.
The information was then reposted to many forums, including forums of the securities investors’ community.
On April 12, the stock market continued to be turbulent with 99 shares seeing prices dropping to floor levels. More than VND105 trillion ‘evaporated’. So, if counting the two previous trading sessions, the total capitalization value at HOSE decreased by VND265.7 trillion, or $11.5 billion over three sessions.
What is noteworthy is that the stock market has reacted negatively despite stable macroeconomic conditions, controllable inflation and a high GDP growth rate of 5.03 percent.
There are many reasons behind this. One of the most important is market confidence. When investors’ confidence is lost, the market shows adverse reactions.
Allowing businesses to mobilize capital through bond issuance is the right policy, which helps diversify capital mobilization channels. In previous decades, businesses mostly relied on commercial banks to seek capital for their operation. As a result, commercial banks had to undertake the contradictory tasks of curbing inflation and boosting growth.
FiinGroup, a financial analysis firm, in its April report, said: “Ignoring the problems that management agencies have discovered and are dealing with, the corporate bond market has proven its important role as an important medium- and long-term capital mobilization channel for the development of businesses in various industries in the context of Covid-19 and the recent recovery.”
The firm’s survey in late 2021 found that in relation with the size of the economy, the Vietnamese corporate bond market is still relatively small compared with other regional countries. While it has surpassed the Philippines (7.4 percent) and Indonesia (2.7 percent), it is still smaller than Thailand (24.3 percent), Singapore (38.4 percent) and Malaysia (55.4 percent).
After several years of hibernation as a result of anti-pandemic measures, businesses now need capital to maintain their operation. FiinGroup’s chair Nguyen Quang Thuan praised the role of bond issuance.
“If businesses had not sought capital through bond issuance, they would have collapsed already, especially in the context of Covid-19,” Thuan said.
The Vietnamese corporate bond market is equal to 16 percent of GDP, according to the Ministry of Finance. It was valued at VND723 trillion in 2021, according to SSI.
Tran Dinh Thien, a respected economist, said that the arrest of some businessmen who broke the law was a move to ‘clean up’ the business environment, thus helping market confidence.
Vietnam has experience in dealing with rumors and mitigating overreactions to reassure the market. With the stock market and corporate bond market, the measures and messages need to be launched in a cautious and transparent way to ensure a soft landing and avoid a hard landing, which may cause massive withdrawal of money and collapse of the system.
Businesses and businesspeople need to be protected and respected instead of exposing them to shame.
In the case of Tan Hoang Minh, appropriate agencies need to supervise the implementation of the commitment to pay money back to investors.
It’s necessary to create favorable conditions for the company to sell some assets to get money to pay investors. Meanwhile, private investors need to understand that once they buy bonds, they have to accept risks.
The financial market is always sensitive and vulnerable. And it will suffer heavily if ‘hard landing’ is made with changing policies, and if false rumors are spread in the market as in the case of Dang Nhu Quynh. The achievements in macroeconomic stability and development in recent years must be protected.