Stock market awaits imminent flow of cash

[kieudiemvje]

The national economy is improving and investments are posed to receive a higher cash flow. Interest rates are also set to drop, as recently determined by the State Bank of Vietnam (SBV)and commercial banks. Combined, these factors suggest that the stock market will prosper again.
On June 28, despite a lot of good news, the VN Index only increased slightly by 0.43 percent, while the HNX Index increased by just 0.47 percent. The total trading value of the market was 2607 billion dong, a slight decrease from the previous trading session. Yet investors believe that more cash will be poured into the stock market, especially after SBV Vietnam gathered commercial banks to discuss lowering the lending interest rates.
Bank interest rates will go down
Commercial banks have agreed to lower lending interest rates to 12-13 percent per annum. Banks will also gradually lower deposit interest rates from 11.5 percent to 10.5 percent. Both can happen because the consumer price index (CPI) increases were low during the last few months.
The target credit growth rate for 2010 is 25 percent, while in the first six months of 2010, it remained low at 10.5 percent, so banks still have a chance to raise the rate by an additional 14.5 percent. Investors hope that interest rate reductions will encourage businesses to borrow capital and help improve efficiency and profit.
According to the Ministry of Planning and Investment, in the first six months, the GDP grew by 6.2 percent, while the CPI in June increased by just 0.22 percent. Vietnam has rapidly increasing export revenues, while the foreign debt is within the safety zone. The macroeconomic picture is very bright compared to that of 2009. For some reason, however, the stock market remains quiet, with low trading volumes every day.
In the first half of 2010, on the HCM City bourse, the average trading value was low at 1890 billion dong per trading session and the figure was 1200 dong on the Hanoi bourse, both numbers much lower than the last months of 2009. The VN Index has decreased by 1.9 percent from early 2010, while the HNX Index has decreased by 10.4 percent. Market analysts believe that this quietness can be explained by the limited cash flow into the stock market.
Stock market will prosper
On both bourses, stock prices are now very attractive, among the lowest price levels in the world. A lot of shares have healthy financial indexes and good operation, but the P/E is just 5-7x, which is equal to ½ of the average levels in previous years.
While domestic investors are making light of the stock market, foreign investors are continuously buying up shares. On the HCM City bourse, in the first six months of 2010, foreign investors’ net purchases reached 6500 billion dong, twice that of all of 2009. With such optimism about Vietnam’s economy, foreign investors will continue pouring money into the stock market.
According to the General Statistics Office, since the beginning of the year, domestic enterprises have exported some 36 tons of gold worth $1.3 billion. As such, a big sum of money is poised to enter the national economy, a part of which will flow into the stock market.
Since the real estate market is quiet, economists believe that the money will enter the stock market as soon as investors are given a “green light.”
Huynh Anh Tuan, a financial expert, noted that worries about the debt crisis in Europe have been subsiding; concerns that China is tightening credit to prevent a real estate bubble has also diminished.
In Vietnam, the national economy is improving and cash is waiting to be poured into investments. When bank interest rates drop and the world economy fully recovers, he maintained, the stock market will become prosperous.