VietNamNet Bridge - Viet Nam's stock markets performed poorly in the year's first trading week with the benchmark indices retreating on both exchanges because of investor uncertainty over market trends.

On the HCM City Stock Exchange, the VN-Index dropped 0.58 per cent last week to close at 481.86 points.

Average daily trade value was down 46 per cent compared with the previous week, reaching VND812.5 billion (US$38.7 million) as more than 60.1 million shares changed hands per session.

Bank and securities shares – twin pillars of the market – fell sharply. Sai Gon Securities Inc (SSI), the most active stock on the southern bourse with 1.8 million shares traded, declined 3 per cent in value while Sacombank Securities (SBS) was the biggest decliner with a drop in value of 20 per cent.

On the Ha Noi Stock Exchange, the HNX-Index slid 3.68 per cent from the previous weeks' close to end Friday at 110.04 points.

Trading value on the northern bourse also decreased 40 per cent to just under VND476 billion ($22.7 million) per session with more than 24.4 million shares being exchanged.

Losses for major financial shares, including Asia Commercial Bank (ACB), Ha Noi Housing Bank (HBB), Sai Gon-Ha Noi Bank (SHB), Bao Viet Securities (BVS) and Kim Long Securities (KLS), were also responsible for the poor showing of the HNX-Index.

However, foreign investor purchases helped to prop up the markets last week. Total net buys for this sector hit VND221 billion ($10.5 million), of which VND164 billion was disbursed on the HCM City exchange and VND57 billion on the Ha Noi exchange.

Viet Nam Securities Depository reported that it had licensed 1,239 foreign investors last year, including 289 institutions and 950 individuals, raising the total number of foreign investors operating in Viet Nam to 14,835.

The domestic stock market entered 2011 without clear market policy information from the Government and this led many investors to question the true level of market recovery.

"Interest rates are still high and the Government's determination to give priority to stabilising the economy in 2011 will likely limit the money flowing into the stock market. The weakening of the market last week has clearly shown this," said Nguyen Quang Minh, an analyst with a Ha Noi-based financial consultancy.

On Friday, Bloomberg sources said the central bank was considering raising the compulsory reserve ratio for the domestic currency to 7 per cent and to 10 per cent for foreign currencies to curb inflation. This had depressed the market and pushed many investors into selling off.

Minh said measures to fight inflation were necessary but added that raising the reserve requirement ratio at the current time would make interest rate reductions inevitable.

"If this becomes reality, investors and the stock market will be negatively affected," he said.

Late Friday, the State Bank of Viet Nam denied that such a policy would be implemented at the present time.

However, Minh said "speculation" about the possibility could still affect investor psychology this week.

"Sell offs will occur if the information does not appear favourable," he said.

A market report by analysts with Bao Viet Securities Co said investor psychology appeared to be influenced by discouraging inflation forecasts for the two months around the Lunar New Year holiday. These were underperforming business results of many listed companies.

"Also, the deliberate intervention in the VN-Index by a few large cap stocks raised doubts about any positive market signals," said the report.

Analysts at SME Securities Co said the 2010 business results of listed companies, due to be published in the coming weeks, would not be outstanding, given last year's high interest rates, an escalating exchange rate and shrinking export markets. In related news, tomorrow will usher in a new era for neighbouring Laos, with the country's stock market opening for its first ever day of trading. This new market promises attractive investment opportunities with favourable factors including large permitted fluctuating bands.

The fluctuating band for the first trading day ranges from – 10 per cent to +100 per cent; investors can buy and sell in the same session and open multiple accounts.

Market insiders say Viet Nam's own stock exchanges have failed to establish the same conditions in 10 years of operation. They say that cash flow destined for investment in Viet Nam might now be "shared" with Laos.

Source: VNS