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Stock market likely to bounce around this week   2008-09-22 - ThanhNien

Analysts warn of volatility ahead for the stock market  
Vietnam’s major stock market in Ho Chi Minh City may rally this week as investors shrug off negative sentiment generated by the US financial crisis.



The VN-Index of 160 leading firms and four closed-end funds ended Friday on a brighter note, regaining 19.78 points, or 4.72 percent, to close at 439.06. The benchmark index fell 12 percent over the first four days of the week.

News of collapses of US investment bank Lehman Brothers, financial giant Merrill Lynch and insurer AIG early last week spooked domestic investors.

The marketplace treaded water last Monday and dipped into negative territory over the next three days. Buying volume in Thursday’s continuous-matching session decreased to 16.98 million shares from 28.9 million last Monday.

“Investors keep a close eye not only on this country’s economy but on foreign countries’ also,” Nguyen Phuong Duy, head of MHB Securities Corp.’s Investment Research Department told Thanh Nien Daily. “Therefore it’s inevitable that the recent global turmoil hit the domestic market.”

But Doan Tran Phuong Phi, chief broker of SME Securities Company, said the VN-Index tumbling below 420 points last Thursday showed domestic investors reacted too strongly to the US’s financial crisis.

“There was no bad news in the country that could hit the market last week, so previous falls were mainly caused by news of the US’s financial meltdown,” Phi said. “The Vietnamese stock market, meanwhile, doesn’t connect much to the US”

That was why a lot of strength came back to the market on Friday, when none of the stocks on the index fell, he added.

Phi expects the government will take advantage of global financial uncertainties to boost the domestic market’s growth by loosening monetary policies.

The State Bank of Vietnam raised the official interest rate, which guilds banks’ deposit and lending interest rates, by 2 percent to 14 percent per year in June in a bid to battle galloping inflation.

“A decrease in benchmark rate will enable domestic businesses to have more investment to grow,” Phi said. Phi and some economists also expect inflation to slow in September, which may encourage investors to invest in stocks.

On the weekend, Prime Minister Nguyen Tan Dung said inflation had increased by 0.18 percent in September, limiting the nine-month consumer price index to 21 percent.

Investment firm An Phuc’s investment director Le Van Thanh Long, however, remained cautious about the market, “The Vietnamese stock market still carries high level of risk.

“It will struggle to fight back if the global crisis lasts into next week. But certainty on the global market early next week will help calm domestic sentiment, enabling the market to rally.”

PVD, HMC and HPG: top picks

Statistics show more than 75 percent of listed companies on the Ho Chi Minh Stock Exchange have an earnings per share rate of over 20 percent and 85 percent have price per earning of between 6 and 8.

“Vietnamese companies showed they were tough enough to survive the oil price volatilities, which hit many companies in developing countries hard,” MHB Securities Corp.’s Duy said.

Duy expects oil drilling PV Drilling (PVD) and steel makers Ho Chi Minh City Metal Corp. (HMC) and Hoa Phat Group (HPG), which have already surpassed their earnings targets for this year, will rally strongly this week.

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