VietNamNet Bridge – The Vietnamese stock market is experiencing its toughest days of the year, with the VN Index falling by 23 percent, even sharper than the 20 percent drop during the “East Sea event” in May.

The dramatic decreases in stock prices at the December 16-17 trading sessions indicated that investors were in a state of panic.

Three reasons have been cited to explain the current situation. First, the Vietnamese market has been affected by the global stock market, which has been hit by crude oil price falls and China’s lowest GDP growth rate in five years.

Just a few weeks ago, Europe hoped the situation would improve thanks to a stimulus package to be released by the European Central Bank. However, the stock markets have been affected by a fear of deflation.

In addition, the Japanese economy cannot recover from the recession although trillions of yen have been pumped to create inflation.

Second, the market is under pressure from foreign investors’ net sales. Foreign investors have reportedly had an excess of sales over purchases, reaching VND4 trillion so far.

Analysts noted that though the foreign investors’ net sales have decreased, it is still unclear when this would end.

VnDirect Securities Company, in its latest report, noted that foreign investors’ tastes have changed. In the past, they would buy blue-chip companies when investors tried to bargain the shares away. Now, they are trying to sell blue-chips.

Third, the stock supply has become “unusually” abundant with many IPOs (initial public offerings) launched. In December 2014 alone, 17 companies had IPOs, which attracted VND5 trillion worth of cash from the market.

Vietnamese securities investors once hoped that 2014 would witness the strong recovery of the stock index after the busy trading sessions earlier this year.

However, the stock index has made a volte-face, falling down dramatically in the last days of the year.

The VN Index growth had decreased to 13 percent by mid-December. The sharp falls of the oil and gas shares have overshadowed the increases that had occurred this year.

Sai Gon Dau Tu newspaper commented that “misfortune never comes alone”. The stock market, which has been gloomy due to the oil and gas share price decreases, has suffered another blow - the State Bank’s Circular No 36 on tightening control over lending to fund securities investments.

Not only oil and gas shares, but the shares of the companies benefiting from the oil price fall have also decreased dramatically as a result of the domino effect.

Kim Chi