Will there be ‘securities fever’ at year’s end?

No evidence shows that the stock market will triumph during the end of this year as it did during the same period last year, experts say.

Dr of Economics Nguyen Quang Hung said: “Like the land fever, which is repeated only once every five years, the prices of stocks are not likely to increase sharply in the second half of the year as seen in the second half of 2006, since the current conditions are not favourable for this.”

Mr Hung said that the socio-economic and the current conditions of the stock market now were much different from those in the second half of 2006. At that time, all factors were favourable for the market boom: Vietnam was preparing to be admitted to the WTO, it organised the APEC summit, and most importantly, idle capital was profuse while the supply of securities was short.

By the end of 2006, Vietnam’s stock market had 108 listing share items only (the figure is 197 now). In 2006, investors had a lot of money and they looked for investment channels. Meanwhile, they have many choices now for injecting money. A series of IPOs have been made recently, attracting several tens of thousand billion dong (Phu My Fertiliser’s and Bao Viet’s IPO alone attracted VND10bil). Real estate projects and other sectors also prove to be good investment destinations.

Meanwhile, a huge sum of capital, analysts say, is being ‘frozen’ on the OTC market as very few transactions are being conducted at this time. Thieu Quang Thang, an analyst, said: “I think it’s unlikely that the VN Index will climb again to the 1,170 point level before the end of the year. The VN Index will many more times fall to below 1,000 and then rise again to 1,000-1,070 points as seen in the last time.”

The director of a foreign investment fund said that that he didn’t know for sure the exact time for the disbursement of the fund, because there was nowhere to inject money. There is no room for foreign investors any more in good and profitable companies, while foreign funds don’t want to make transactions on the OTC market.

The fund’s $200mil has been available to be pumped into Vietnam’s stocks. However, with the current conditions, the fund plans to make investment in real estate and tourism projects. In fact, a lot of big investment funds, including VinaCapital, Dragon Capital, Inchochina Capital and BankInvest, are injecting money in resorts, real estate projects and emerging companies, showing that the stock market is not the top priority for them any more.

Some experts previously guessed that foreign investment funds would delay their disbursement to wait for new IPOs. However, foreign investors did not buy much at the IPOs held recently (Phu My Fertiliser, Ba Ria Thermopower plant, Bao Viet, Vincom). Therefore, it is very likely that the coming IPOs will also not attract big capital from foreign investors.

Analysts have estimated that the IPOs to be held in the near future will need the huge capital of nearly VND100tril ($6.25bil). Bui Ngoc Tuoc, a securities expert, said that with such a huge capital needed to ‘swallow’ all the shares to be issued, the stock market would find it hard to regain the peak it reached in 2006.

While the domestic capital for the stock market is nearly exhausted, and foreign capital is not being disbursed, the VN Index will remain at 1,000-1,100 points, experts say.

Huy Nam, a securities expert, sharing the same view as other analysts, added that investors now were not as eager about the stock market as they were in 2006.

Therefore, the stock market will probably not see another ‘securities fever’ just yet.

Source: VNE