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Seasonal shares fail to lift indices   2010-08-09 - Viet Nam News

The nation’s stock markets remained in the doldrums last week, with the VN-Index closing on Friday at 482.82, a cumulative decline of 2.25 per cent from the previous week.

Average daily trading volumes on the HCM City Stock Exchange also fell to a meagre 34 million shares, worth a daily average of only VND982.6 billion (US$50.4 million).

Shares on the Ha Noi Stock Exchange suffered a similar fate, with the HNX-Index dropping by 4.79 per cent on the week to end the session on Friday at just 146.14.

The average volume of trades on the northern bourse slumped to just 28.2 million shares, 23.4 per cent below the previous week’s level, for an average daily value of VND770.6 billion ($39.5 million).

"Investors aren’t yet ready to reparticipate in the market, " said Nguyen Van Manh, director of a Ha Noi-based, foreign-invested securities firm. "Then, a rising wave in seasonal shares was hardly strong enough to boost the market as a whole."

Capital has begun to flow into shares based on seasonal business cycles in a familiar pattern seen each time the nation’s stock markets have slumped, said market analysts.

Reports of financial services providers Stoxplus Corporation noted that shares in rubber, electricity, and educational publishing and supplies have all risen in recent sessions.

Autumn was always the strongest season for harvesting rubber, and major importers like China were experiencing heavy demand at a time when Thailand – the world’s leading rubber exporter – has been hit with unfavourable weather conditions.

The report also noted that the start of a new school year was benefitting educational publishers and supply companies, while summer power shortages have heightened demand for electricity.

Therefore, a rising wave has appeared in shares of these sectors, even though many of the companies did not post strong performances in the previous quarter, said the chief of MHB Securities Co’s brokerage department, Hoang Thach Lan.

The cyclical nature of these businesses has become an established factor in the decisions of investors, despite their seemingly stagnant business results in previous quarters, Lan said.

A rising wave in these types of cyclical stocks also often implied speculative behaviour, since the cycles were repeated annually without surprise, Manh said. Speculators could base their decision on fundamentals or the potential for these cycles to create small waves.

"That’s why some stocks with poor earnings performance in the second quarter hit their ceiling prices."

However, investors have also continued cutting losses from shares they held when the market fell below 500, further discouraging market demand, commented FPT Securities Co market analyst Nguyen Quang Vinh, predicting the HCM City market this week would retest the VN-Index’s 480-level and end the correction.

"Global economic pressures have been lessened since the latter half of the second quarter, although global growth has shown signs of a slow-down," said Nguyen Viet Hung, head of research and investment for SME Securities Co, recommending that capital follow the emerging trend and be allocated into sectors with a capacity to deliver high seasonal earnings.



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