Rally Ends on Back of Fresh Inflation Fears

After the higher fuel prices were announced, Deputy Minister of Finance Vu Thi Mai admitted that they were likely to add 0.85 per cent to the year’s inflation rate.

The price hike also appeared at a time when profit-taking pressures were already building on the stock market and were therefore highly likely to have an impact on investor psychology, wrote FPT Securities Co analyst Nguyen Van Quy in a report.

On the HCM City Stock Exchange last week, the VN-Index lost 1.7 per cent over the course of the week, ending Friday’s session at 432.11 points. The VN-30 Index, which tracks the 30 leading shares by capitalisation and market volume, declined by an even more substantial 3.28 per cent to close out the week at 487.03.

On the Ha Noi Stock Exchange, HNX-Index also fell 0.23 per cent from the previous week to close on Friday at 71.56.

The volume of trades rose on both exchanges as investors rushed to realise gains. Volume on the HCM City bourse rose 32 per cent to over 105.6 million shares, worth an average of VND1.72 trillion ($82 million) per session, while volume in Ha Noi also rose 14 per cent to 101.5 million shares, with an average daily value of VND949.3 billion ($45.2 million).

Last week, investors unloaded bank shares after favouring them heavily the past few weeks – pushing this group of shares down by nearly 7 per cent overall. Sacombank (STB), Eximbank (EIB), Military Bank (MBB), and Asia Commercial Bank (ACB) all dropped, while Habubank (HBB) fell on Friday after 10 consecutive sessions of gains.

Analysts agreed the decline in banking shares was inevitable, as share prices were high and the takeover rumours that had initially fueled investor interest in the sector were no longer prevalent.

Some major banks last week, including Eximbank and Standard Chartered, began to lower deposit rates to below 14 per cent per year, following a word from State Bank of Viet Nam Governor Nguyen Van Binh that it was time to lower the deposit interest rate ceiling by another per cent.

Binh’s comments had little impact on the market.

“In the short term, we don’t highly anticipate decreasing interest rates to have an impact on the market, since the expectation of lower rates has already been reflected in the recent strong rally in major stock indices of over 20 per cent,” Quy wrote.

Investors last week did begin to shift their attention to real estate stocks, however, which would be in a position to benefit from any decline in interest rates, analysts from the financial information company Vietstock wrote in a report. They noted that property shares were the leading gainers on the market last week, increasing by an average of 4.52 per cent over the course of the week.

Song Da Urban and Industrial Zone Investment and Development (SJS) led the gainers, increasing by over 24 per cent on information that it received Government approval to continue building the VND15 trillion (US$714.3 million) Nam An Khanh urban area project.

SJS shares became even hotter on news that an individual investor spent nearly VND500 billion ($23.8 million) to purchase 15.4 million shares, bringing his total stake in SJS to 15.79 per cent.

In addition to SIS, Tu Liem Urban Development (NTL), Van Phat Hung Corp (VPH) and Khang Dien House Trading and Investment (KDH) also rose sharply.

Vietstock analysts predicted this group of shares would continue to attract investments, particularly from investment funds, a number of which were targeting undervalued properties.

Foreign investors concluded last week as net sellers on the HCM City exchange, selling off shares worth a net of VND11 billion ($523,000). On the Ha Noi bourse, they extended their net buys to VND51.4 billion ($2.4 million).

Quy predicted shares would continue to decline this week as policymakers had yet to formulate a response to the challenge that higher petrol prices pose to the official goal to calm inflation.