Stock Fever with Capitalized Value Up To Over US$430 Million

The impact of being a WTO member and the equitization of state-owned enterprises from now until 2010 will create a hot atmosphere in the local financial market, according to an assessment by financial experts on the future and opportunities for one of the world's fastest developing markets: Viet Nam.

As for the stock market, however, the opportunities are represented by actual fluctuations of the market prices, as judged by world financiers: “A stock market is a clinical thermometer of an economy”.

From the decline in confident

The stock exchanges will get more new stocks to listing at year-end. (Photo: T.C)

When joining WTO we can get more opportunities; however, at the same time there are a number of challenges when many industries will gradually lose their protection. Moreover, the decision to cut tax incentive after listing has pushed many enterprises into an unwilling race to list.

As the stock market is inherently sensitive, stock investors immediately become doubtful and the decline in confident has pushed the market into a gloomy period.

The daily trading value in stock exchange has quickly fell from the average level of VND140 billion (US$8.9 million) per session to under VND90 billion (US$5.6 million) per session at the end of October, in which on certain days it reached only VND61.8 billion (US$3.9 million), the lowest level in the last 4 months.

VN-Index fluctuated around the threshold of 512-530 points during 2 consecutive weeks as if it has no exit.

To the stock price booming

However, the worries disappeared right on November 7, the day Viet Nam joined the WTO. On that day, while the whole country was eager to set up new milestones after many years of negotiating and waiting, the stock market gave a signal with the fact that VN-Index “gently” increases by 2.92 points to pass the hard level of 520 points.

The VN-Index has increased about 20 percent in two weeks. (Photo: T.C)

The following days saw a recovery of belief and a strongly increasing buying power. VN-Index was down only 2 times in the 12 latest trading sessions and increased to a total of 93.05 points to reach the level of 610.16 points at closing on November 22. This means that if an investor invests US$1 million, he can get an average interest of US$180 thousand in 14 days.

The above fluctuations show more of the “growth” of the stock market that is gradually becoming a real clinical thermometer of Viet Nam's economy.

The WTO commitments were widely publicized, and then came the APEC Week event, during which Vietnam welcomed tens of thousand of officials and entrepreneurs from all over the world.

High expectations and the coming great opportunities immediately influenced the stock market strongly and created a “price fever” in the past few days.

Still depending on foreign demand

Foreign investors finding the change to buying stocks at Ho Chi Minh Securities Trading Center. (Photo: T.C)

The stock market has sped up quickly and the capitalized value of the whole market has gone up to over VND64 trillion (US$4 billion) from VND56.94 trillion (US$3.55 billion), increasing over VND7 trillion (US$450 million) within only the last two weeks. The trading value is averagely over VND200 billion per session, equivalent to US$12.5 million.

They are attractive numbers for the price increases on the stock market at present. However, nearly 9 million stocks worth more than VND600 billion (US$37.5 million) of the impressive trading data have been bought by foreign investors, accounting for 35.5% of the total trading value.

This price increasing stage has therefore got the “support” from foreign organizations, and domestic investors are once again easily led.

Foreign investors always appreciate the potential of Viet Nam stocks; however, with their continuous buying, their “room” (the limit of buying stock rate) is gradually exhausted. Who will keep the market stable in the future as domestic investors are not stablilized in their investment?

What will happen if foreign investors stop buying stocks? The stock prices may sharply fall, and series of local businesses would "woo" one another to enter the stock exchange during the last 40 days of the year, resulting in the possible 'overloaded' situation for the exchange. The answer depends on domestic investors as foreign investors would never have such short-term vision.

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By Tuong Chau

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