Bourse needs to cool its heels

Calls are growing for the overheating stock market to have a cooling down period. Since the indexes of Ho Chi Minh and Hanoi bourses bottomed out by the end of February, at 235.5 points and 78 points respectively, the two exchanges have undergone three-month strong upward movements of 75 and 85 per cent to reach 411.6 points and 144 points on May 29, the latest trading day.

Analysts said though the market had previously been under-priced and dropped to an unreasonably low level, the sharp rise was in need of some corrections.
Nguyen Mien Tuan, director of Viet Dragon Securities Corporation, said the market was “overheated mostly due to investors’ excitement.” Almost all securities companies have given warnings of the current market’s potential risks.

Stock prices of securities and banking companies such as Asia Commercial Bank (ACB), Saigon Thuong Tin Commercial Bank (STB) and of blue-chip companies such as Vinamilk (VNM), Cable and Telecommunication Materials Jsc. (SAM), Refrigeration Electrical Engineering Corporation (REE), PetroVietnam Fertiliser and Chemicals Jsc. (DPM) ceased to be hot, according to Tran Hoang Son, customer services executive of EuroCapital Securities Company.

For instance, stock price of VNM continually dropped by 9 per cent over two trading weeks. Prices of SAM, DPM, ACB and STB fluctuated and declined by VND1,000- 2,000 last week. Son said though market trading remained high, investors were not buying at any price and significant buy orders placed at floor prices demonstrated the drop in demand and investors’ hesitance.

“The market is in a correction phase,” said Pham Ngoc Hai, brokerage executive of Habubank Securities Company. Investors’ worries were mounting, as trading volumes on correction days dropped to less than 60 million shares per day in Ho Chi Minh Stock Exchange compared to more than 70 million shares per day two weeks ago, according to FPT Securities Company’s analysis department.

Hai said the market rally had pushed stock prices to relatively high levels and they were no longer cheap. “Though the worst is predicted to be over, and the economy has show signals of a recovery, the stock market should rally step-by-step rather than soaring over quick period of time, when many difficulties are still lying ahead,” said Hai.