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Investors ignore positive signs   2010-03-29 - Viet Nam News

Despite a lift on Friday from the State Bank of Viet Nam's announcement that it would leave the prime rate unchanged through April, shares on the HCM City Stock Exchange saw a losing week overall last week, with the VN-Index dropping by a cumulative 2.07 per cent to a close on Friday of 505.30.

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While inflation in March was under control, investors were obsessed by and fixated on the prime rate, which actually had less significance, since real market lending rates were far beyond the base 8% rate, reaching 15-18%.

Average daily trading volumes retreated from the previous week to about 45 million shares, a drop of 15.54 per cent, while average daily value declined by nearly 19.2 per cent to VND1.88 trillion (US$98 million).

On the Ha Noi Stock Exchange, meanwhile, the HNX-Index finished down on the week by a whopping 3.59 per cent, ending the day on Friday at 163.76 points. The average daily value of trades in Ha Noi fell slightly by 7.56 per cent to around VND898 billion ($47 million) on an average volume of just 27.2 million shares.

The markets were clouded by the release of four major items of economic news during the week, including announcements that inflation had climbed by 0.75 per cent in March, the trade deficit had expanded in the first quarter to $3.6 billion (a full 25.6 per cent of total export turnover), and the nation's growth rate had hit 5.83 per cent in the first quarter of the year, as well as the decision on the prime rate.

Except for the trade deficit number, the other news was regarded as positive but nevertheless failed to boost shares, said FPT Securities Co analyst Le Thi Bich Hang, suggesting that wary investor psychology continued to rule investor decisions rather than economic data or business results.

"Indices on both bourses were down, along with declines in both trading volumes and values, which sent another negative signal reflecting investor caution," Hang said.

Foreign investors concluded last week as net buyers on both exchanges, but the net value of their buys dropped by over 63 per cent from the previous week to VND114.8 billion ($6 million), Hang noted.

"The market seems to be being manipulated by a few speculators," said Le Dat Chi of the HCM City University of Economics.

While inflation in March was under control, investors were obsessed by and fixated on the prime rate, which actually had less significance, since real market lending rates were far beyond the base 8-per-cent rate, reaching 15-18 per cent.

Meanwhile, investors ignored much constructive information said Chi, including the Ministry of Finance decision to allow margin trading and a reduction in the clearance time for shares to just two days, information that would have given the market a real boost in prior years.

"Negative sentiment will continue to send the market down, and when share prices fall to the expectations of speculators, they will then start to buy," Chi said.

Bao Viet Securities Co analysts said the market concealed risk in the short term as investor sentiment was unstable and investors needed time to regain their confidence. They encouraged short-term investors to stay out of the market and wait for clearer signs of an uptrend, but they advised medium- and long-term investors to pick up shares that declined by more than 1 per cent.

Analysts of Saigon Securities Inc and Viet Capital Securities Co retained a brighter outlook, predicting the market this week would be buoyed by the release of first-quarter business results by listed companies and the movement of investment funds to close out their net asset values at the end of March.

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