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Indices plunge despite brisker trades   2011-06-21 - VNS

Stocks plunged on Friday on both national stock exchanges, sending the two benchmark indices down for the first week in three, despite some positive information about policy and interest rates.

Lending interest rates at some big banks tended to decrease by 1-2 per cent from the previous peak, standing at 16-17 per cent per year while investors showed growing interests in Government bonds, shown in the recent success of Government bond bidding on the Ha Noi Stock Exchange.

In addition, the Ministry of Finance has proposed to the Government solutions for reduction or exemption of income tax, including granting exemption of tax for securities investors from August 1 until the end of 2012.

However, unfavourable information for the stock market announced late last week was that the central bank required commercial banks to restrict lending for securities.

Following a new draft circular on safety in the operation of credit institutions, banks must ensure a capital adequacy ratio of 10 per cent or more to be able to lend for securities investment and loans to this sector could not exceed 3 per cent of their equity.

On the HCM City Stock Exchange, the VN-Index lost 1.36 per cent over the course of last week, closing Friday's trading at 438.93 points. Liquidity improved, however, with average daily trading value up 45 per cent over the previous week to reach VND848 billion (US41.2 million) on a volume of more than 50 million shares traded per day.

On the Ha Noi Stock Exchange, the HNX-Index closed Friday at 76.63 points, posting a loss of 3.12 per cent over the previous week's close. Trading value increased by 30 per cent over the previous week, averaging VND743 billion ($36 million) on a volume of 60.6 million shares per day.

Foreign investors concluded last week as net sellers on both markets, unloading a combined VND143 billion ($6.9 million) worth of shares.

Tuesday's session exploded with trading values on both bourses exceeding VND1 trillion ($48.5 million), the highest value since the beginning of this year.

Active profit-taking activities during the week sent down many hot stocks, which climbed high after two successive weeks of rises, particularly property and securities stocks such as Saigon Securities Inc (SSI), Kim Long Securities (KLS), VNDirect Securities (VND) and PetroVietnam Construction (PVX).

These were also the most heavily traded stocks last week with KLS seeing an average of 7.46 million shares traded per session, VND 4.65 million shares, PVX 4.58 million shares and SSI 3.45 million shares.

Analyst with Bao Viet Securities Co Pham Van Khoa said the possibility of business losses in securities firms in the second quarter drove investors to sell out securities shares in recent days and this selling spread to other stocks.

Meanwhile, analysts at Saigon Securities Inc said the last two sessions were really a bull trap which many investors created to sell shares at the high prices. The predicted today's trading could continue to slump as confidence in a continued uptrend showed signs of decreasing.

"However, a lower price base could lift the market again," they said.

This week, some key economic data influencing the market will be released, including the inflation rate in June and import-export value.

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