Small investors who risked savings and borrowed money to buy into Vietnam's booming stock exchange are fleeing the market, which shed more than a third of this year's gain in less than a week.
"Small investors like myself are selling because we are not sure how soon the market can recover losses we are experiencing," said one low-paid state employee, who asked not to be identified. "With the pressure of interest on loans, we need to sell now."
The Vietnam Index on the Ho Chi Minh City Securities Trading Center shed almost 10% in the past week to a three-month low of 905.53 points. It hit a record high of 1,170.67 points on March 12.
"Small investors, especially those who borrowed, could not take the heat from the slide in the past two weeks," a market analyst at a foreign investment fund in Ho Chi Minh City said.
Economists, market analysts and foreign fund managers have all warned investors for months that the market was overheated, several predicting a decline of 30% this year.
They said a slew of new listings expected this year would help to cool the market. The index, one of the world's fastest growing stock markets last year at 144.5%, is still up nearly 20% this year.
"The sell-down is extremely healthy," said Spencer White, a former Merrill Lynch strategist who is joining Vietnamese investment bank Thien Viet Securities. "It injects an element of reality and what companies should expect is a reasonable valuation of their equity."
Thousands of ordinary people have invested their savings, borrowed money, or mortgaged homes to buy stocks in the hope of making money quickly on the main exchange, the over-the-counter Hanoi Securities Trading Center and an unregulated market.
But for some, the reality of losses and warnings from market authorities are beginning to sink in.
On Tuesday, shares in 76 of the 107 companies listed in Ho Chi Minh City fell. The Hanoi exchange closed at 319.51 points after weeks of declines. It reached its lifetime high of 469.72 points on March 20.
Brokers also said a decision by the main exchange to raise the minimum sale volume to 100 shares per transaction from 10 shares also triggered selling by small investors wanting to avoid liquidity problems when that rule takes effect from June 7.
Transactions of less than 100 shares could only be executed between investors and their brokerages.
Shares in FPT, the largest listed company, closed down 4.8% at 434,000 dong ($26.9). Shares in the second-largest listed firm, dairy product maker Vinamilk (VNM), fell 4.7% to 161,000 dong.
"We think the wall of money can sustain stocks in a 900-1,100 band, but there will be a lot of investor caution above the top end," John Shrimpton of Ho Chi Minh City-based Dragon Capital fund manager said in a research note at the end of March.
Source: Reuters
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