The announcement by the super-corporation State
Capital Investment Corporation (SCIC) that it will buy stocks to
stimulate demand has not helped rescue the falling stock market.


While 300,000 securities investors were puzzled by
sliding stock prices, SCIC made a strong commitment that it would spend
thousands of billion VND to buy stocks to help stimulate demand.


However, the situation has not improved over the last
two months, since the announcement was made. The market has continued
falling since then.


Some investors have even blamed SCIC for their losses,
saying that SCIC’s announcement created a ‘bull trap’, as it prompted
individual investors to buy stocks at that moment in the hope that
prices would go up with the corporation’s intervention. However, as the
market has been sliding, the investors have incurred big losses.


As SCIC announced before, the information about when
it will buy stocks, the securities items to be bought and the sums of
money it will spend to buy stocks will be kept secret. Therefore,
doubts have been raised about whether SCIC has spent money to buy
stocks as promised.


Anh Son, an investor on Thang Long Securities
Company’s trading floor, guessed that SCIC has not bought any stocks so
far, and that SCIC just promised to buy stocks to calm investors down.
Son estimates that in order to rescue the stock market, SCIC needs to
spend VND5-15tril.


Since March 2008, the average trading volume has
remained at VND500bil per trading session. If SCIC did buy shares on
the market, the trading volume would increase sharply. Meanwhile, Son
said that he has not been able to see any considerable increase in the
trading volumes in trading sessions since March 10, when SCIC announced
its stock purchase plan.


A broker at a securities company said that the
purchase by SCIC might be carried out under the form of negotiated
transactions. If so, the corporation would not be able to help prevent
prices from sliding further. Moreover, the trading volume under the
form of negotiated transactions would not be big enough to persuade
investors to believe in SCIC’s efforts.


An analyst says that he would not be surprised if
someone told him that SCIC had not bought stocks, which he thinks is
understandable.


In fact, the purchase of stocks of companies would not
cause any changes in the companies’ profit; the profit and performance
of businesses is the most important thing in determining the value of
their stocks.


Secondly, purchasing and keeping a large volume of
stocks will weaken the liquidity of stocks, which has been very low
over the last time.


Thirdly, the nature of SCIC’s stock purchase is
transferring capital from the private sector to the state sector, which
proves to come contrary to the current equitisation process.


Fourthly, the fact that SCIC does not reveal the
information about the share items it will purchase may raise doubts
that SCIC is only buying stocks of companies which have good relations
with SCIC.


Fifthly, the stock prices on the market not only
reflect supply and demand, but also reflect investors’ confidence in
the prospects of the national economy. Vietnam’s economy, like the
world’s economy, is now in big difficulties, therefore, it is quite
normal that Vietnam’s stock market is falling down. Stimulating demand
is just a short-term solution – it cannot solve the problem to the root.


Finally, Vietnam is facing a serious inflation
problem, and the government needs to weigh the pros and cons of
spending a huge sum of money to rescue the stock market or reserve
money to fight inflation.


Nguyen Van Quan, Project Director of Ba Dinh Real
Estate Joint Stock Company, said that the government has every reason
to decide to rescue 80mil of people instead of 300,000 securities
accounts.


Le Thi Bang Tam, former Chairwoman of SCIC, said that
the corporation is not the fund to stabilise the market as people
mistakenly believe.


Tam also said that SCIC’s assets are very big, but
most of them are in stocks, while its cash is limited, so investors
should not require SCIC to spend all its money to buy stocks. If the
government provides money to SCIC for the corporation’s purchase of all
mortgaged stocks, the losses would be very big. Meanwhile, investors,
not SCIC or the government, would bear the losses.