Armchair analysts, herd mentality jerk market

Stock market investors are decrying the pernicious influence of foreign financial analysts’ dire predictions of gloom and doom on the performance of the market.

HSBC’s prediction that the VN Index would drop to 900 by the end of the year wreaked havoc in trading on July 2. That day, the market closed with the Index below 1,000, a decline partly attributed to the HSBC report.

However, investors who had not sold shares on July 2 breathed a sigh of relief on July 3 and 4 when both the VN Index and HaSTC index strongly recovered.

Many were also angry because they had believed the forecast and bargained away their shares, losing a lot of money.

Investors once again were dismayed when Merrill Lynch recently released its investment strategy for the Asian Pacific region in 2007 which said that the company would "reduce its asset allocation to zero in Viet Nam and use it to fund a mild overweight in China."

According to Merrill Lynch, a 1,000-point VN Index was psychological support with little substance to back it.

Investors weren’t sure whether to cut or play.

Dang Vu Hai, an investor in HCM City, said that he was not only tired of unreliable information about the Vietnamese stock market but also afraid of official information.

Nguyen Thuy Nga, a customer of Asia Commercial Bank, said, "Information on the websites of listed companies and of the two stock exchanges, especially the State Securities Commission, always is uploaded more slowly than the spreading speed of information on the bourse. Thus, we often have to search for information ourselves on forums or securities websites created by individuals, and risk being misled."

Tran Hoang Thang, an information analyst for a foreign fund, said that it was also investors’ fault because they did not check the veracity of information and traded following the crowd.
Nevertheless, the State Securities Commission should have penalties in place for provision of wrong information and investigate the motive for the provision, he added.

"It is clear that information that has not been checked but is issued at a vulnerable time will cause difficulties and losses to Vietnamese investors," said Bui Quang Hoan, chairman of Van An Sinh Co.

The stock market was very sensitive to information, especially in Viet Nam. where trading still depended on the herd mentality, he said.

Despite disclaimers in the HSBC report and on brokerage websites warning investors not to unduly rely on analysis, Phan Vu Tuan, deputy general director of the International Securities Co, said, "Many investors have complained to me that they were shocked because some information is too optimistic and some too pessimistic."

Le Hai Tra, deputy director of the HCM City stock exchange, admitted that "the Vietnamese stock market still lacks independent institutions able to professionally analyse information about the market. Only time will tell whether an assessment of a financial institution is right or wrong, and the market’s performance will depend on the decisions of investors."

Investors should pay attention to the independence of analysts to avoid "shading" assessments which can badly effect the market, he said.

Another securities company director agreed, saying, "I feel that much information was intentionally released improperly. Since last year, there have been at least five times in which foreign institutions warned that the stock market would fall but before and after the warning, foreign investors bought shares in large volumes."

Bui Nguyen Hoan, a representative of the State Securities Commission in HCM City, cautioned, "Don’t rush to blame foreign warnings. If we use information and analyse statistics in the context of the country’s stock market, then investors will have a multi-dimensional view."

Information on securities trading is various and stems from many sources motives. However, investors with basic knowledge and a sound mind can select information and avoid unpleasant surprises, Hoan said.

Source: VNS