New Index Whets Investor Appetites

Investors early last week were upbeat on remarks by the State Bank of Viet Nam Governor Nguyen Van Binh that certain foundations were in place to bring down interest rates and suggesting that rates would be reduced gradually on signs that inflation was in check and bank liquidity has reached healthy levels.

“Deposit interest rates can be pushed below 10 per cent by the end of this year, as the inflation rate eases,” said Binh, emphasising that the Government has targeted an inflation rate this year of below 10 per cent.

With official plans to restructure the market, investors were more confiden that Viet Nam’s stock market would revive this year, said Minister of Finance Vuong Dinh Hue.

On the HCM City Stock Exchange last week, the VN-Index gained 7.7 per cent over the previous week’s close, concluding Friday’s session at 401.74 points. The volume of trades doubled that of the prior week, averaging nearly 42.3 million shares and a value of VND618 billion (US$29.4 million) per session.

The uptrend spread across 23 out of 24 sectors, with shares in the real estate sector gaining 10.6 per cent, followed by the construction sector with a 7.3-per-cent increase, and banking shares, up 6.9 per cent.

Investors focused heavily on stocks to be included in the basket to calculate the the new VN-30 Index which tracks the movements of 30 leading stocks by market capitalisation and liquidity.

Many shares in the basket increased sharply last week, becoming a driving force in maintaining the market’s rise. Over the course of the week, Vietinbank (CTG) gained 37.8 per cent; insurer Bao Viet Holdings (BVH) was up 36.5 per cent; property developer Hoang Anh Gia Lai (HAG) increased by 27.6 per cent; and Sacombank (STB) gained 23.8 per cent.

Tran Hoang Ngan, chairman of the committee managing the VN-30 Index, said the introduction of the index had already had a positive impact on investor psychology, strengthenomg investor confidence that State administrative agencies have begun to move proactively to make the market more attractive.

Investors expect that current or planned index funds were or would be buying those stocks to construct their funds, said the director of research and economic analysis of Sai Gon-Ha Noi Fund Management, Nguyen Viet Duc.

“Those stocks will definitely receive more attention in the future,” Duc said.

Real estate developer Hoang Anh Gia Lai (HAG) was the biggest gainer last week (25.76 per cent) and has hit the ceiling for five of the last seven sessions. In addition to real estate, HAG announced recently that it expected to earn revenue this year from a rubber plantation in Laos, hydroelectric generation, sugarcane, mining and iron ore processing – information that was apparently attractive to foreign investors, who have bought a total of over 2.5 million HAG shares in the last 11 sessions.

Foreign investors poured money into both exchanges last week, responsible for a combined net buy of nearly VND452 billion ($21.5 million) worth of shares.

On the Ha Noi Stock Exchange, the HNX-Index concluded Friday’s session at 61.85 points, an increase of 5.83 per cent over the previous week’s close. The volume of trades also climbed 76 per cent, totalling over 35.7 million shares, for an average value of VND285.7 billion ($13.6 million) per session.

A new price index called VN30 will be put in use beginning today at the HCM City Stock Exchange (HOSE).

HoSE general director Phan Thi Tuong Tam said the new index would be used in addition to the current VN Index.

Thirty listed companies including Sacombank, Saigon Securities Inc, Hoang Anh Gia Lai Group, Kinh Do Corp and Vinamilk, have been selected for the VN30 Index based on several criteria including market capitalisation value, free float ratio and trading value (in the second half of 2011).

Deputy Finance Minister Tran Xuan Ha said last Friday he expected the VN30 Index to serve as a helpful tool for investors as well as authorities in mapping out stock market related policies.

The smallest market capitalisation of the selected companies stood at over VND6 trillion (US$293 million), and the largest one, VND57 trillion ($2.7 trillion). Their weighting cap is capped at 10 per cent, and the free floating ratio was between six to 100 per cent.

The average trading value of the VN30 stocks was VND3 billion ($1.47 million) per trading day.

The VN30 is expected to better reflect market liquidity and is a preparation for the development of the derivatives in the future.