Investor hopes for positive third-quarter corporate results helped domestic stock indices experience another week of increases, although profit-taking also remained heavy on both the HCM City and Ha Noi stock exchanges.

The VN-Index increased 11.83 points overall last week to close at 582.84, a rise of 2.07 per cent over the previous Friday’s close, with the average trading volume and value for the week both reaching record highs for the HCM City Stock Exchange.

Trading volumes averaged 75.9 million shares per day while the average daily turnover reached about VND3.7 trillion (US$207.9 million), both figures about 12 per cent higher than previous week’s averages.

On the Ha Noi Stock Exchange, the HNX-Index ended the week at 183.47 after gaining 3.97 per cent over the previous Friday. The average trading volume increased slightly to 41 million shares, for an average daily value of VND1.6 trillion ($89.9 million).

Newly-listed shares on both exchanges – including shares of Mekong Seafood (AAM) and Viet Nam Mechanisation Electrification and Construction (MCG) – all hit remarkable highs, while banking and financial shares still showed little improvement.

Nguyen Binh Duong from the FPT Securities Co brokerage department said that the market was showing healthy moves without any signs of overheating. Investor expectations for satisfactory third-quarter business results as well as news about listed firms offering bonus shares helped the market grow solidly despite continuing heavy net sales by foreign investors.

In HCM City last week, foreign investors were net sellers of 9.8 million shares, with a net value of nearly VND960 billion ($53.9 million). In Ha Noi, they were responsible for net sales of 614,900 shares, worth a total of VND23.6 billion ($1.3 million).

Duong said this new week would continue to see dramatic trading days with both investor moves to buy on hopes of further market gains and accelerated sales to realise profits. He expected the VN-Index to fluctuate between 560 and 600.

Viet Nam International Securities Co general director Pham Linh agreed that the Index was heading to 600 despite recent downward adjustments, as both the global and domestic economies were seeing positive developments.

"We can’t deny the contribution of financing levels to the last period of market increases," said Linh, referring to the level of commercial bank lending extended to finance securities investment. "It’s this factor that has pushed trading values to extremely high levels."

Combined daily trading values on the nation’s two stock exchanges amounting to VND4 ($222 million)-5 trillion ($277 million) per day over the past three months demonstrated the significant contribution of this source of capital, said Nguyen Thanh Ha, head of the Saigon Securities Inc analysis department, in a recent report.

He said the total value of outstanding bank loans that had been poured into the stock market was now at around VND19 trillion ($1.1 billion), a figure that was still within the safety limit of 20 per cent of the banks’ charter capital. Nevertheless, outstanding loan value had climbed to about 80 per cent of the peak it reached earlier in 2007, he said.

But Linh warned of the potential fallout from a massive sell-off.

"Investors should be conscious of using financing levels based on overconfidence in overall upward market trends, when the foundations are not truly solid, in order to avoid having to pay a heavy penalty as they did during the sell-off in early 2008," Ha said.

Linh said the loans were still necessary for strengthening and accelerating market growth, suggesting that instutions that provide such loans to investors should impose reasonable limits on credit, and that these limits should be adjusted according to market developments.

Linh noted that banking and financial share continued to be poor performers during the current market rally, partly due to investor worries about restrictions imposed on credit growth and worries about bank profitability.

"Compared with the general position of share prices currently, these shares are at reasonable and safe price levels," he said. "There’s a high possibility that the economic recovery will soon make banking shares more attractive."