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Credit tightening will not affect stock market   2009-07-22 - DTCK

Information about banks tightening loans for securities investments would have raised concerns that this would negatively influence the stock market – if the information had been released one year go. However, this is not the situation at this moment.

 

Information about banks tightening loans for securities investments would have raised concerns that this would negatively influence the stock market – if the information had been released one year go. However, this is not the situation at this moment

In principle, the tightening of credit means that investors will not have as much money to make securities investments. Therefore, it is understandable why people are worried that the tightened credit will affect the stock market.

 

The State Bank of Vietnam has sent documents to commercial banks, asking them to reserve capital for production and business, while limiting credit for consumption, real estate and securities investments.

 

In fact, the stock market has been influenced by the credit tightening policy for the last month, when the State Bank of Vietnam announced it would inspect banks’ credit activities. This was considered a move that heralded the policy on tightening credit to fund securities investments.

 

Since the move, banks have been controlling their loaning for securities investments, stopping providing loans and checking outstanding loans. Dau tu chung khoan reporters found out that there is still ‘room’ at securities companies to loan to securities investments. Most borrowers have sold stocks to pay debts back to banks. Other investors, fearing risks, dare not borrow money for investments at this moment.

 

The activities of loaning and borrowing money to inject in securities investments at this moment are not as hot as they were one month ago, when securities companies’ loan limits had nearly run out. At that time, short-term investors rushed to borrow money just for two weeks to make surfing investments.

 

Experts believe that the credit tightening will not affect the stock market because investors themselves are cautious when borrowing money at this moment. Currently, investors only borrow money for several days to make payments. For example, when restructuring their investment portfolios, investors want to purchase some share items but they still cannot sell other items to get money, so they borrow money from banks to make payments.

 

However, experts still believe that the tightening of credit will affect investors.

 

Investors understand that the State Bank of Vietnam is tightening credit because it wants to keep control over the stock market and does not want to see the stock market develop too hotly.

 

Experts have applauded the policy on tightening credit for securities investments, saying that it is a good policy for the market now.

 

As banks will reserve capital to fund production and business, listed companies in particular and businesses in general will benefit from the loans.

 

The State Bank of Vietnam has slashed the interest rate for compulsory reserves of commercial banks at the State Bank, a move that should be seen as a method to encourage money to be put into circulation.



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