As the stock market is experiencing strong volatility and shows little signs of strong recovery, the State may struggle to sell its stake in State-owned enterprises (SOEs) on schedule.

State divestment plan from 2018 to 2019-20.

Under the SOE equitisation plan approved in July 2017 by Prime Minister Nguyen Xuan Phuc for 2017-18, the Government has to offload its stakes in 316 SOEs, but it has only done so in 31 firms.

Under the plan, the Government must start equitising 127 SOEs, including 85 SOEs for 2018. As of September 2018, only 11 SOEs’ equitisation plans were approved, raising the number of SOEs with approved equitisation plans to 26 since the beginning of 2017.

The slow pace has raised concerns about delays or cancellations for the remaining deals as there are only two months left till the end of the year and the stock market has fallen in recent months, making investors hesitant about new deals, according to the Ministry of Finance.

The stock market has been underperforming recently.

The benchmark VN Index gained 22.4 per cent in the first four months of the year – among the world’s top growing markets – to touch its all-time high of 1,204.33 points on April 9.

After that, the benchmark index has been volatile, hitting the year’s lowest level of 900 points twice on July 5 and last Friday.

The VN Index ended last Friday at 900.82 points, a loss of total 7.3 per cent in seven trading sessions and reducing investors’ confidence in local assets.

Even a strong third quarter earnings season couldn’t save market performance. Bank stocks, broadly recognised as one of the main pillars of the stock market, have declined despite earnings growth rates of about 50-250 per cent.

The poor market sentiment has resulted in State-owned banks’ failures to offload their stakes in other financial institutions to comply with anti-cross ownership rules.

The Joint Stock Commercial Bank for Foreign Trade of Viet Nam (Vietcombank) this month failed to sell its shares in the Military Joint Stock Commercial Bank (MBBank) and the Viet Nam Export Import Joint Stock Commercial Bank (Eximbank).

A similar scenario is seen in other SOEs’ share-selling deals.

The Viet Nam National Petroleum Group (Petrolimex), a member of the Viet Nam National Oil and Gas Group (PetroVietnam or PVN), recently asked the Government’s permission to change its share selling plan to 2019-20 from 2018 as the market share price is lower than expectations and due to market volatility.

Other deals either received little attention from investors, including the initial public offerings (IPOs) of the Power Generation Corporation 3 (Genco 3) and the Viet Nam Rubber Group, or were cancelled like the IPO of the Vietnam Television Cable Corporation (VTVCab).

According to securities companies, the stock market may keep declining and investors should not buy local stocks at the moment.

Sai Gon-Ha Noi Securities JSC (SHS) said in a note last week the long-term market outlook has worsened and the downtrend may continue until the market meets a new balance point.

MB Securities JSC (MBS) said the market is quite vulnerable to external factors and news, badly affecting investors’ sentiment and making them ignore positive internal elements.

Investors should stay calm and focus on controlled risks now by offloading more stocks from their portfolios, MBS said. The statement indicates the market may remain quiet in the coming weeks.

As the Vietnamese market is highly connected to regional emerging ones, which have been suffering from low investor confidence, this could damage the local market’s future outlook, according to HCM City Securities Corporation. — VNS