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Banking & Finance

NFSC notes pros and cons for stock market

Released at: 15:20, 03/09/2015

NFSC notes pros and cons for stock market

National Financial Supervisory Commission report flags issues for stock market but believes recovery will be maintained.

by Hung Nguyen

The National Financial Supervisory Commission (NFSC) has issued its economic review for the first eight months of the year.

While the report identifies some difficulties facing Vietnam’s stock market it also notes reasons for believing it will recover.

The VN-Index closed on August 27 at 545.89 points, 12 per cent lower than at the end of July, while the HNX fell around 10 per cent. Foreign investors sold some $11.7 million worth of shares since the beginning of August.

The NFSC said the decline in the stock market is due to both internal and external factors. Internal factors include foreign investors selling petroleum company stocks such as PVD and GAS due to crude oil prices tumbling to $32-$35 a barrel. The VND/USD exchange rate also increased almost 3 per cent in August. The market decline makes many investors sell, especially those using margin calls, which only exacerbates the situation.

External factors include the Dow Jones and S&P 500 in the US falling 10 per cent from their peak in May. The MSCI, which gauges global stock market activity, also fell 17 per cent since the beginning of the year and 27 per cent against the same period last year. Moreover, the withdrawal of capital from emerging markets saw Exchange-Traded Funds (ETFs) be short of capital, with ETF Vietnam Market Vector seeing $18 million withdrawn since the beginning of August.

There are also factors indicating recovery in the stock market, however, with basic economic and market factors being in good stead. Vietnam has balanced trade with most significant partners and is not overly influenced by movements in the way other emerging economies may be. Revenue of listed companies in the first half was positive, with the average P/E ratio staying at around 10.6. Policies to encourage the stock market are being issued as planned.

The NFSC estimates the Renminbi fluctuating by + 6.3 per cent/ -6.5 per cent will not have too much of a direct effect on Vietnam’s money market or economy.

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