The Hong Kong and Shanghai Banking Corporation (HSBC), in its
latest report about Vietnam’s stock market, once again affirms that
Vietnam remains an attractive market in the long term, despite the
current difficulties.[/i]





When the market shrinks[/b]






[table]








[/table]March seemed to be a ‘stormy month’ for Vietnam’s
stock market as the VN Index dropped by 22%. The VN Index has dropped
by 44% so far this year, while it has only dropped by 53% since it hit
its peak in March 2007.





According
to HSBC, the VN Index has plunged continuously recently mainly because
of domestic factors. Macroeconomic management policies of the country
have been changing continuously as the government is now focused on
fighting inflation.





Vietnam’s
CPI increased by 19.4% over the same period last year, and there is no
clear sign of the CPI increase slowing. The State Bank of Vietnam in late March decided to resume the purchase of dollars, which has made the VND, once again, devaluate against the dollar.





The
short-term loan interest rate on the interbank market has dropped to
3%, though it once soared to 40%. GDP grew by 7.4% in the first quarter
of the year compared to the same period last year, and the government
has had to slash the targeted GDP growth rate to 7.5%.





The
continuous changes have been creating big difficulties for the stock
market. Small investors, incurring heavy losses, have become panicky,
and been trying to sell stocks. Meanwhile, foreign investors are buying
more shares than they are selling. In March 2008, they purchased
$249mil worth of stocks, the largest volume purchased by foreign
investors since January 2007.





Over the last three months, investors have injected $450mil in total in Vietnam’s stock market, while they have been pushing up sales in other Asian markets.





HSBC experts think that investment funds in Vietnam with big capital have been taking advantage of the low prices of stocks by purchasing a lot of shares in the last time.





The
difficulties have been affecting the market’s liquidity and scaling
down the stock market. The average daily trading volume at the HCM City
Stock Exchange (HOSE) in recent days is $36mil only, lower than at the
end of 2007. HOSE now has only four listed companies which have the
market capitalisation value of more than $1bil, while there were nine
companies late last year.





Where are the opportunities?[/b]





In
order to rescue the market, the government has asked the State Capital
Investment Corporation (SCIC) to purchase shares and asked commercial
banks to stop selling mortgaged stocks. However, HSBC thinks that these
are just short-term remedies, which can only help relieve the pain, but
not heal the wound.





HSBC thinks that the difficulties of Vietnam’s stock market will exist for some more months. There may be many other changes in the monetary policies.





It
is unwise to try to predict to what extent the stock market will slide,
as the market depends heavily on the psychology of investors, which
cannot be weighed or measured, especially as Vietnamese securities
investors do not have much experience.





Nevertheless,
HSBC’s experts believe that the market now shows long-term
opportunities. Despite the uncertainties in the short term, those who
intend to hold shares for more than one year will have good
opportunities.





Vietnam remains among the attractive destinations of foreign direct investors, especially from Taiwan, Japan and Thailand.
Shares of prestigious companies in the fields of consumer product
production and infrastructure should be investment addresses of
long-term investors, the report maintains.