Economic data and policy decisions announced last week – including a national one-month inflation rate in February of 1.96 percent and the State Bank's decision to retain the prime rate at 8 percent, as well as announced fuel price and electricity rate increases – had a depressing effect on investor psychology and sent both of the nation's major stock market indices down.
"Investors are worried about the direction of monetary policy in the near future and the Government's capacity to control the monetary supply as inflation rises," commented Thang Long Securities Comapny Deputy Director Quach Manh Hao.
On the HCM City Stock Exchange, the VN-Index lost 10 points over the course of the last five sessions to close at 496.91, an overall decline of 2 percent from the previous trading week's close.
Volume, however, increased by over 30 percent from the week of depressed trading prior to Tet (Lunar New Year), with trading of over 25.2 million shares per day. Trading value averaged over VND1 trillion (US$52.4 million) per day, an increase of nearly 24 percent over the week prior to the holiday.
On the Ha Noi Stock Exchange, meanwhile, the HNX-Index declined by 1.35 percent on the week to 162.43 points. Daily activity edged up to 11.62 million trades, with an average daily value of VND370.7 billion ($19.4 million), up nearly 28 percent from the previous trading week.
The expectation of a week of gains to open the Year of the Tiger was frustrated by the impact of the Government's mixed bag of data and policy announcements, said FPT Securities Company market analyst Tran Quang Vinh.
"However, even though indices fell on both exchanges, the week's trades still gave positive signals," Vinh said, noting that three of the five sessions saw overall gains.
It was Tuesday's session, in which shares sagged by over 2 percent on a State Bank official's comment that commercial banks would soon be allowed to negotiate higher lending interest rates, that tended to weigh on the week, with investor psychology generally picking up in the subsequent sessions, Vinh said.
A number of blue chips posted overall gains over the course of the week, such as Vietcombank (VCB), Saigon Securities Inc (SSI), and Viet Nam-Italy Steel (VIS). Energy and mining shares also rose on the announcement of higher electricity rates, including those of Pha Lai Thermal Power (PPC), Vinh Son-Song Hynh Hydropower (VSH), and Thac Ba Hydropower (TBC).
Both Hao and Vinh predicted a market rally in the coming weeks so long as inflation remained under control, but signals from foreign investors were troubling to Vinh. While the activity of foreign investors tended to track developments on global markets, he said, their sales could weigh on the attitudes of domestic investors.
Foreign investors ended over a month of consecutive net buys to become net sellers in the final three sessions of last week. Net sales grew significantly from VND228 billion ($12 million) on Wednesday to VND516.6 billion ($27 million) on Friday. Net sales on the week totalled 9.5 million shares on both bourses, worth a combined VND115.3 billion ($6 million).