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Markets yawn at inflation news   2011-03-29 - VNS

Stock values last week moved within a narrow band on the nation's stock exchange, with indices losing value on both national exchanges compared to the previous week.

On the HCM City Stock Exchange, the VN-Index declined by 0.72 per cent over the course of five sessions to close on Friday at 457.74 points.

According to a weekly market report from FPT Securities Co, the average daily value of trades fell 19.4 per cent to VND717.3 billion (US$34.2 million) while the averge volume per session dropped over 17.2 per cent to 32.7 million shares.

On the Ha Noi Stock Exchange, the HNX-Index decline by over 2.5 per cent to close on Friday at 92.82. The average daily volume trades actually outpaced that of the HCM City exchange to reach nearly 36.2 million shares, worth an average of nearly VND569.4 billion ($27 million) per day.

Inflation data for March was released on Thursday, showing that consumer prices rose at a whopping 2.17 per cent compared to February's levels, the highest single-month inflation rate in 34 months and the first time ever that the March inflation rate has been higher than the rate in February, the month which often sees peak inflation due to the seasonal influence of the Tet (Lunar new year) holiday.

With consumer prices rising 6.12 per cent since December 31, the Government target to control inflation at under 7 per cent for the entire year seemed infeasible, and stronger monetary tightening measures aimed at soaking up liquidity were seen by analysts as increasingly likely, including an order that commercial banks increase their compulsory capital reserves.

Despite the bad news, the stock markets offered some positive signals last week, taking the negative economic news in stride, without a massive sell-off and with some shares posting gains on the week, said Ho Ba Tinh, an analyst with the financial website

Penny stocks were major gainers, filling in the list of top 10 advancing shares on both exchanges. In HCM City, tobacco trader Hoang Long Group (HLG) rose 24.7 per cent, Sao Mai Construction (ASM) 20.7 per cent, Binh Dinh Minerals (BMC) 14.8 per cent, while, in Ha Noi, Yen Bai Cement and Minerals (YBC) gained 37.8 per cent, Construction and Investment Co No 18 (L18) 34.4 per cent.

BMC has seen a combined rise of about 50 per cent in the past two weeks, with nine consecutive rising sessions before it dropped to its floor price on Friday of VND31,800 ($1.50).

BMC's rise was attributed to the company's strong prospects this year for its plan to explore for titanium-zircon ore in an area of 150ha in the northern province of Binh Dinh, as well as news that export tariffs on its main product, TiO2, would decline from 15 per cent to 10 per cent.

FPT Securities Co analyst Nguyen Ngoc Tuan forecast that the market would decline slightly this week as investors were expecting little additional news to brighten the market mood.

"After a long time suffering losses and facing unstable financial market, investors are more cautious about their disbursements," said Tuan. "Current Government regulations are also reducing money flows into the stock market which make us less optimistic about market prospects in the short term."

Tinh said that some other economic indicators would be released, particularly information economic growth in March, but the information was anticipated and unlikely to have significant influence on market trends.

Foreign investors finished last week as net buyers on both the HCM City and Ha Noi markets, picking up nearly 3.4 million shares worth a combined VND91 billion ($4.4 million). And while Vietinbank (CTG) and Vietcombank (VCB) were the the most-active shares in this sector on the HCM City bourse, construction giant Vinaconex (VCG) was their most heavily traded share in Ha Noi.

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