Investor Confidence in Stock Market takes a Sharp Dip

One banking expert said that the total capital from domestic investors being put into the stock market is just hovering around the hundreds of billions of VND. The figure for foreign investment is not much higher. The market really needs to gain some momentum if it is to avoid problems, he said.

Falling prices have left investors trying to cut losses.

In 2011, listed firms encountered a range of difficulties, such as high inflation and interest rates, monetary-tightening policies and rising costs. This year, the stock market is most likely continue to deal with these same challenges. Prices of key products like electricity, water and coal will also be on the rise, along with the challenges in currency exchange rates.

According to many economists, long-term measures, including economic restructuring is needed, which should positively affect the stock market. However, they say, there are some short-term measures that could be put into place to ensure liquidity, which would help attract more capital into the market.

The Government has said that it will take action in order to improve the stock market. However, to date, the most specific measure taken was the issuance of Circular No 183, concerning the establishment and management of open-end funds – a move hoped to help retain foreign investments, which were expected to retreat from the market this year.

Meanwhile, no action has yet been taken to increase the flow of capital into the stock market or ease high interest for companies facing difficulties.

Earlier, the State Bank of Vietnam requested that commercial banks lower deposit interest rates to 14% per year, and plans to further reduce those rates to 12% and then 10%. However, in reality, lending interest rates remain high, causing difficulties for many enterprises to get loans.