Long-term investors will profit against the current
stock market instability, EuroCapital Securities analysts suggested in
their latest equity markets report published over the weekend.


"As curbing inflation is the leading issue," analysts
wrote in the report," the Government will continue to restrict sources
of credit for securities investment. With the daily securities trading
band also tightened, short-term investment is unprofitable."


The report suggested traders direct investment toward petroleum, chemical and consumer goods stocks.


"These sectors are defensive at times like this and
generate profits in times of inflation. Investors who invest in these
sectors will see stable, albeit long-term, profits."


The report also indicated that foreign investors would
participate less in the stock market in the second quarter than in the
first, but were likely focusing their sights on major IPOs coming later
this year.


According to EuroCapital Securities calculations,
foreign investors bought US$130mil worth of stocks and fund
certificates in the first quarter, while spending $230mil on bonds.


"This suggests this sector has begun paying more
attention to long term and stable income from the stock exchange rather
than on big but risky shares," the local brokerage said.


Difficulties in the global economy, especially a
possible US recession and a weak dollar contributing to appreciation of
the dong, has made foreign investors more cautious about securities
investment in Vietnam.


Prognostications


The report predicted that the State Capital Investment
Corporation would increase its market buy-in in the next quarter, and
the Government would continue restraining credit for securities
investment.


"These policies will continue playing an important role in market development in the second quarter."


The EuroCapital Securities analysts forecast that the
VN-Index in the second quarter would reach around 570, identifying this
as a reference point for investors gauging market performance and
urging investors to plan investments carefully this second quarter.


The report noted that dangers of oversupply remained,
particularly with a number of commercial banks holding a large amount
of shares of diminished value in collateral for loans they made to
securities traders.


If the daily trading band were loosened back to the
previous 5% on the HCM City Stock Exchange, the release of these shares
onto the market could trigger another steep decline in the VN-Index.


"Therefore, the narrow trading band will continue for
the time being, which limits the Index to only modest gains," the
analysts said. Some State-owned enterprises were still likely to carry
out their initial public offerings (IPOs) as originally planned, under
an old script by which offer prices exceed real market value.


The time between the IPO and the listing of shares has
also had a dampening effect on the liquidity of shares and their
attractiveness to investors.


Share of Vietcombank were auctioned last December, for
instance, in a highly-publicised IPO but still have not been listed on
the stock exchange.


The bank's shares traded at VND58,000 on the
over-the-counter market (OTC) as of April 4, more than half of the
winning bid price on the IPO back on December 26.


Sabeco shares were trading on the OTC market at
VND48,000 on the same day, also well below the IPO winning price of
VND70,003 on January 28.


The report suggested the Government revise the auction system for upcoming IPOs.


"The Government should direct equitised firms to
choose strategic partners with detailed plans prior to going public.
Furthermore, it should shorten the time between auction and listing in
order to preserve liquidity of shares."