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Stocks back in investment portfolios   2008-08-21 - VNE

The recovery of the VN Index has made stocks an attractive investment channel again in comparison with gold, foreign currencies and real estate.


The recovery of the VN Index has made stocks an attractive investment channel again in comparison with gold, foreign currencies and real estate

Stocks seriously hurt investors when the VN Index dropped dramatically, causing them losses of 50-80%.


However, it seems that stocks have regained their position as the most attractive investment channel. The VN Index, once at the deepest low of 366 points, has climbed to 500 points, an increase of 36%. If investors purchased shares when the VN Index was at the bottom and sold shares now, they would gain the profit of 100% on some share items.


The liquidity of the stock market proves to be relatively high, as the two latest trading sessions saw the trading volume of over 35mil shares worth over VND1tril.


According to Le Dinh Ngoc, Director of Thang Long Securities Company, in the last two months, stocks have brought higher profitability than gold, real estate and dollars. The stock market has recovered step by step after a long period of falling down, thanks to goods news about the macroeconomy. Measures to fight inflation, stabilise exchange rates and the monetary market have been bringing the desired effects.    


Ngoc said that the gold market has been fluctuating continuously. Especially, the domestic price is now much higher than the world’s price, making it more difficult to give forecasts about the gold price in the future.


After reaching the highest peak in March 2008 with the record price of VND19.5mil/tael, the gold market has gone up and down many times, once sliding to the deepest low at below VND17mil/tael.


Nguyen The Hung, Chief Representative of Swiss MKS finance investment group, said that the gold price in the domestic market is far higher than the world’s level, citing two reasons to explain the big price gap. First, the State Bank decided to halt gold imports to fight the trade deficit, which has caused a supply shortage. Second, enterprises had to import gold before at high prices, and now they do not want to slash sale prices.


It seems to be unprofitable to purchase dollars at this moment due to the government’s measures to fight speculation. Moreover, the dollar supply is expected to become profuse towards the year’s end, when overseas remittance, foreign direct investment capital arrive.

The dollar price has fallen down from the highest peak of VND19,000 at the end of June to VND16,500/US$ now.


The frozen real estate market is clearly not a good investment channel now. Low liquidity and a quiet market both have been keeping investors away.


Van Quan, director of a real estate project in Vinh Phuc province, said that the government’s measures to tighten real estate credit, the increased land tax and the economy’s difficulties will make the real estate market gloomy for some more time.


Quan said that the policies on land and houses may be loosened in the time to come; however, the loosening will only benefit those who have a real demand for accommodations.

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