The State Bank of Viet Nam's decision on Wednesday to depreciate the dong by another 2 per cent accelerated the downward slide of shares on both national stock exchanges on Wednesday, with nearly 80 percent of codes shedding value despite an overnight rise on Wall Street.
The depreciation of the dong from VND18,544 to VND18,932 per US dollar was part of an effort to control the nation's trade deficit, the State Bank said yesterday
In response, the VN-Index lost 1.73 per cent yesterday to close at 455.49 points, while the value of trades on the HCM City Stock Exchange fell 7 per cent to a one-month low of just VND988 billion (US$51.2 million). Volume reached just 37 million shares.
Sacombank (STB), the most-active share on a volume of 1.87 million, closed down 1.25 per cent, while Vinh Son-Song Hinh Hydropower (VSH) fell by 2.45 per cent with 1.68 million traded.
On the Ha Noi Stock Exchange, the HNX-Index declined by 2.62 per cent to end the session at 132.62 points. Both volume and value dropped by 10 per cent, with only 26 million shares traded, worth a combined VND651 billion ($33.7 million).
PetroVietnam Construction (PVX), the most-active stock nationwide with a volume of 4.86 million shares, declined by 3.8 per cent, while Kim Long Securities Company (KLS) dropped by 3.23 per cent on a volume of 1.5 million shares. Construction giant Vinaconex (VCG) also plunged by 2.43 per cent with 800,000 shares traded.
Pomina Steel (POM) was among few codes to post a gain, hitting its ceiling price for the fourth straight day after announcing its plans to buy back 9 million shares.
Several export companies which stood to benefit from the dong depreciation also posted gains, including Long An Food Processing Export (LAF), Ben Tre Forestry and Seafood Import-Export (FBT) and Sao Vang Rubber (SRC).
PIV Petro Investment and Valuation Company (PIV) saw its first day of trading yesterday, closing up nearly 27 per cent from its reference price to VND20,300 ($1.05) per share, with 36,000 shares changing hands.
Both stock exchanges opened in positive territory yesterday but exhausted share demand depressed most shares in the latter part of the trading day. More than 460 codes out of a total of 586 on both exchanges lost value.
Foreign investors were most immediately influenced by the currency depreciation, decreasing buys yesterday to a net of just VND34 billion ($1.8 million) on both bourses, a decrease of 60 per cent from the previous session.
Tran Van Don, Head of analysis department for Ha Thanh Securities Company, said the State Bank decision reignited investor worries about inflation.
"Many investors will likely shift investment from risky and low profitable securities to more attractive channels including foreign currency, gold or real estate," Don said.
In addition, a number of investors who had bought shares at depressed prices following last week's slump were active in selling out again yesterday, contributing to the steep decline, he said.
Analysts of HCM City Securities Company said the higher exchange rate would put pressure on interest rates and the coupon rates of Government bonds.