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Wednesday, March 5, 2008
Viet Nam stock market fall 4.2 pct despite govt efforts

The stock market sank more than 4% on Wednesday as more government measures to fight double-digit inflation and prop a free-falling market failed to restore battered investor confidence.

The Ho Chi Minh City Stock Exchange is down 37% this year after local retail investors bailed out following an earlier series of central bank directives to banks that dried up liquidity.

It is the worst performing market in the world this year and has fallen more than three times as far as MSCI's Asia excluding Japan index. "The market is badly hurt by the news stories and rumours that banks stopped buying dollars from clients including foreign stock investors, leading to their inability to buy shares," said an investor in Hanoi, who wished to remain anonymous.

Domestic investors have been concerned that foreign investors will not have enough dong to buy shares.

In early trading the index of about 150 shares stood at 580.87 points, down 28 points or 4.6%. The securities regulator does not permit the Southeast Asian country's developing market to rise or decline by more than 5% on a single trading day.

Robbie Davis, head of proprietary trading at VinaCapital said the smaller cap shares in the market were cheap with P/E ratios of less than 10%.

"The P/Es are not undervalued yet," Davis said. "The government is doing the best it can to turn this around because it's getting super ugly."

Late on Tuesday, a statement on the government web site said authorities would raise compulsory reserves of banks, widen the dollar/dong trading band to +/- 2 percent from +/- 0.75% and go ahead with obliging banks to buy compulsory Treasury bonds on March 17.

Other steps included "taking measures to prevent stock market falls and raising share supply" and not limiting the number of companies listed on stock markets. It also called for clearer initial public offering schedules for state-owned enterprises, which the government earlier this year said should be delayed.

The statement by the government gave no specific dates for more than 10 measures it said were to fight inflation, which was 15.7% in February compared with a year ago. (Reuters)