VN stocks fall on poor sen­ti­ment

Viet Nam News - - MARKETS -

HAØ NOIÄ — Viet­namese shares ended yes­ter­day on a neg­a­tive note as in­vestor con­fi­dence re­mained weak on global geopo­lit­i­cal risks and in­com­ing new reg­u­la­tions on mar­gin lend­ing rate.

The bench­mark VN In­dex on the HCM Stock Ex­change dropped 0.75 per cent to close at 1,148.49 points. It lost to­tal 3.5 per cent last week.

The HNX In­dex on the Haø Noäi Stock Ex­change fin­ished at 133.31 points, nearly un­changed from last week’s end of 133.34 points. It fell to­tal 3.4 per cent last week.

More than 246.3 mil­lion shares were traded on the two lo­cal ex­changes, worth VNÑ8.8 tril­lion (US$390.4 mil­lion).

The mar­ket trad­ing con­di­tion was neg­a­tive with 196 gain­ing stocks against 241 de­clin­ers while 124 other stocks were flat.

Banks, in­sur­ance-fi­nance com­pa­nies, rub­ber pro­duc­ers, food and bev­er­age firms, and build­ing ma­te­rial providers were among the worst-per­form­ing sec­tors on the stock mar­ket.

Ac­cord­ing to se­cu­ri­ties com­pa­nies, weak mar­ket sen­ti­ment fol­low­ing the lat­est bomb strike in Syria was the ma­jor cause for the fall of the stock mar­ket yes­ter­day.

As in­vestors were wor­ried about ris­ing ten­sion in the Mid­dle East, the VN In­dex lost as much as 1.32 per cent early yes­ter­day but some­how re­cov­ered on strong bot­tom-fish­ing.

“It was a ‘for­tu­nate’ the US and its coali­tion part­ners at­tacked Syria on Satur­day so that we avoided a ‘blood bath’ that could have hap­pened if it (the airstrike) took place dur­ing a trad­ing day,” Vieät Dragon Se­cu­ri­ties (VDSC) said in its daily re­port.

An­other fac­tor was ru­mours of mar­gin lend­ing rate, which “neg­a­tively im­pacted in­vestors’ sen­ti­ment and caused the mar­ket to fall deeply” and strong sell­ing made the in­dices de­crease, BIDV Se­cu­ri­ties Corp (BSC) said in a note.

The lo­cal mar­ket is con­cerned about a new reg­u­la­tion of the State Se­cu­ri­ties Com­mis­sion, which was drafted in Jan­uary, re­quir­ing the ini­tial mar­gin ra­tio con­tracted by se­cu­ri­ties com­pa­nies for mar­gin lend­ing to be at least 60 per cent from the cur­rent rate of 50 per cent.

Mar­gin lend­ing is the amount of fund­ing that an in­vestor must per­son­ally put up from his own re­sources. Ini­tial mar­gin ra­tio is the por­tion of the pur­chase price that an in­vestor has to de­posit at bro­kers when bor­row­ing money to pur­chase se­cu­ri­ties.

That also means “mar­gin lend­ing con­trac­tion”, re­ferred to the prac­tice of us­ing bor­rowed funds from a bro­ker to trade a fi­nan­cial as­set, which forms the col­lat­eral for the loan from the bro­ker, would be at max­i­mum rate of 40 per cent.

The pro­posed reg­u­la­tion has raised pub­lic con­cerns that the cash-flow into the stock mar­ket will be squeezed, thereby re­duc­ing in­vestors’ bor­row­ing de­mand due to their weaker abil­ity to de­posit at bro­ker­ages.

A tight­ened mar­gin lend­ing pol­icy means in­vestors would have to off­load parts of as­sets to bal­ance their in­vest­ment port­fo­lios, lead­ing to strong sell­ing pres­sure on the mar­ket.

In this stage, cau­tious in­vestor sen­ti­ment would con­tinue to dom­i­nate the mar­ket trad­ing with highly risky for­eign macro-eco­nomic news, BSC said. — VNS

In­vestors on the Ho Chi Minh Stock Ex­change (HOSE) in HCM City. — VNA/VNS Photo Hoaøng Haûi

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