Heavy profit-taking early in yesterday’s session on the HCM City Stock Exchange drove the VN-Index down by 4.5 per cent yesterday to close at 503.41 points, despite significant net buys by foreign investors.

The huge sell-off by domestic traders drove market volume on the day up to 63.75 million shares, from 44.47 million on Tuesday, and generated a total trading value of VND2.96 trillion (US$164.4 million). Meanwhile, foreign investors bought a net of 4 million shares.

On the Ha Noi Stock Exchange, the HNX-Index also plunged by 3.5 per cent to 164.87 points. Trading value rose to VND865.3 billion ($48.1 million) on a volume of 23.4 million shares, up from 19.6 million on Tuesday.

Foreign investors, meanwhile, were net buyers on the northern bourse, although by a more modest net of 420,000 shares.

Banking shares led trading on both stock exchanges, with Sacombank (STB) being the most-active share on the HCM City market, with a volume of 5.43 million, and Asia Commercial Bank (ACB) generating a volume of 2.8 million to top trading in Ha Noi.

Tighter credit due to a shift in central bank policy was the biggest factor in the market decline, Nguyen Thanh Binh, head of analysis for APEC Securities Co, told Dau tu Chung khoan (Securities Investment).

Brokerage houses had already begun restricting financial leverage for clients, Binh said, tightening the flow of capital into the securities market.

Investors were now dumping shares following an overuse of leverage, agreed An Phat Securities general director Tran Thien Ha in an interview with Dau tu Chung khoan. The need to repay outstanding loans was requiring them to sell shares now, Ha added.

Nguyen Hoang Hai, from a HCM City-based securities firm, also blamed investors for allowing them to be spooked by shifts in regulatory policies, despite other supportive factors for share value.

Attractive share prices suggested that a buy-in should have occurred early this week as market growth was supported by many positive factors, including favourable moves on global markets, Hai said.

"In this context, long-term investors should start buying now for the new opportunities when the listed companies release fourth-quarter earnings," he added.