The VN Index on the Ho Chi Minh City Securities Trading Center closed at 988.86, down 2.71% from Wednesday and nearly 5% below a record of 1,040.7 on Tuesday.
The market declined days after government regulators said they were concerned about speculators driving up share prices. In addition, fund managers told a capital markets conference in Hanoi that the market was overheated and due for a correction.
They said intense speculation by foreign and domestic investors, or "hot money", had created an artificial shortage of stock, sending the index up nearly 32% already in 2007.
The index breached the 1,000-point resistance level at the close last Friday for the first time since the market opened in July 2000.
"There is a real concern that share prices in some blue chip firms including PetroVietnam Drilling were excessive," a trader said.
Shares of PV Drilling, a subsidiary of state oil monopoly PetroVietnam, extended its loss on Thursday to close at 267,000 VND (16.55 US$), down 4.98% from Wednesday.
Shares of the company, which has a price-to-earnings ratio of more than 315 times, have lost around 9.5% after climbing to a record 295,000 VND on Tuesday.
Other losers on Thursday included cable maker Sacom and real estate firm Thu Duc Housing Co. which fell 4.65% and 4.78%, respectively.
The price-to-earnings ratio for most stocks listed on the benchmark Ho Chi Minh City Securities Trading Center is in the 25 to 30 times range compared with the regional average of 18 to 20 times.
Last year, the index was one of the fastest-growing in the world at 144.5%, with much of the increase coming in November and December as companies rushed to qualify for tax breaks by listing before year-end.
Source: Thanh Nien
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