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VN-Index to test a new low, analysts predict   2008-11-24 - Thanh Nien

Vietnam’s major stock market in Ho Chi Minh City is on a downward trajectory to 300 points, stock experts have predicted, saying the extension of its plunge would give investors the chance to snap up some bargains.



The VN-Index fell on every trading day last week to close at 318.96 points last Friday, its lowest level in almost three years. Trading volume was fairly low, averaging 13 million trades each day, compared with an average of 16 million a day the previous week.

The benchmark index, a gauge of 166 leading companies and four closed-end funds, has lost 65 percent of its value this year.

“The market is now in need of positive news on the economy,” said HCMC-based investment fund An Phuc investment director Le Van Thanh Long, adding he expected the economy to remain gloomy over the next six months.

“The market is set to test a new low. I expect the VN-Index will fall below 300 points,” Long told Thanh Nien Daily.

He said the slightly stronger buying in the last two trading days of last week was a positive sign. “However, many investors are still standing on the sideline, waiting for share prices to drop more.”

Trading volume was a mere 10.8 million shares last Monday, 12 million last Tuesday and 10 million last Wednesday before rising to 15.7 million shares last Thursday and 17.6 million last Friday.

But Long said the level of 300 points or a little bit lower would offer investors a golden opportunity to buy shares at attractive prices.

FPT Securities Co.’s broker Nguyen Hai Son said last week’s stock market performance was dull because institutional investors weren’t buying. “They are worried about the capital gains tax, which will take effect in January next year,” Son said.

Under the Personal Income Tax Law, stock investors will have to pay tax of either 0.1 percent on every sale of securities or 20 percent on the whole year’s net profit.

Analysts from Kim Eng Securities Co. said domestic stock markets had tracked the US markets closely over the last three months. The company’s analysts predicted the VN-Index will slump to 250 points and the Hanoi exchange’s HaSTC-Index will hit 65 points if the US’s Dow Jones Industrial Average falls to 7,300.

The Dow Jones Industrial Average and Nasdaq in the US hit their lowest levels in more than five years last week and the broad-market Standard & Poor's 500 fell to its weakest since 1997.

Although the market ended Friday on a high note, with a big rally inspired by the news that president-elect Barack Obama had chosen New York Federal Reserve chief Timothy Geithner as Treasury Secretary, the losses for the week were still staggering.

In the week to Friday, Dow index tumbled 5.31 percent to 8,046.42.

Sell PPC, buy low-price shares

Pha Lai Thermal Power Joint Stock Company (PPC)’s announcement that it will delay a dividend payment this year triggered concerns about the company’s health.

The company, Vietnam’s largest listed power supplier, said on the exchange’s website last Wednesday it would struggle to pay dividend this year as its official-development assistance debts from the Japan Bank for International Cooperation (JBIC) had expanded as the Japanese yen strengthened against the dong.

JBIC loaned Pha Lai 36.2 billion yen at the end of last year, according to the Kim Eng Securities Co. The debt was then equal to VND5,153 billion (US$304 million) and the dong was only 142.34 per yen. The dong weakened to 174.84 per yen last Thursday.

“Pha Lai may suffer a loss of VND60.5 billion ($3.6 million) by repaying 1.86 billion yen in this quarter and may have to book a contingent liability of VND1.12 trillion ($66 million) for the remainder of the outstanding debt. The firm’s net profit in the first nine months of the year is a mere VND793.3 billion ($47 million), so its net profit for the year may be a minus figure,” said analyst Ngo Thuc Vu from Kim Eng Securities last Thursday. The dong reached VND178 per yen last Friday.

Stock website Vietstock, in which IDG Venture holds a 10 percent stake, has also predicted the VN-Index will fall to a new low this week.

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