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Sustained rally remains elusive   2011-05-31 - VNS

The two national stock exchanges last week saw a heavy plunge in the first three days but trades on Thursday picked up, reaching over VND1.3 trillion (US$62 million).


Two indicators, the VN-Index and HNX-Index, continued to rise the next day but with much lower liquidity as investors hesitated to sell.


"This was because too many codes hit their ceiling prices and had a buying surplus, and more securities companies accepted to buy collateral shares with a higher rate, making prices decline," said Hoang Thach Lan, director for brokerage of MNB Securities Company.


The VN-Index closed the week down 5 per cent to 410.82 points, while the HNX-Index lost 7 per cent to end 70.83 points.


The average value of trades on the HCM City Stock Exchange reached VND517 billion ($24.6 million), increasing 30 per cent over the previous week. On the Ha Noi Stock Exchange, the figure rose with a similar rate to VND389 billion ($18.5 million). The average volume climbed 40 per cent to 36.7 million shares in HCM City and 50 per cent to 37.6 million shares in Ha Noi.


"The surge of volumes during some sessions was a big question," Lan noted.


In the last two sessions of the week, Refrigeration Electrical Engineering Corp (REE) owned the largest ceiling buying surplus of over 1 million shares. REE announced it would buy back 10 million treasury stocks starting from June 1.


After these two sessions of rallies, blue chips slid only 4.9 per cent compared to the previous week, despite a dramatic fall earlier. Real estate and financial services shares could not create reliability as information in these sectors was not favorable due to recent tightening of monetary policy. "If the market is based solely on these large-cap shares, it will be likely to see another bull-trap," reported FPT Securities Co analysts.


"Viet Nam's economy is really in trouble, many businesses had to cut down on operations in the first quarter," said Lan. "If this difficulty continues, investors will lose their trust in the market. In addition, the amended law will make no significant changes. The new provisions concentrate only on issuance in the primary market."


Analysts for financial information website said that as the economic outlook was not really clear, the down trend of the market will continue. "The trade deficit remains large, registered FDI has plunged and growth in industrial production has shown signs of slowing," said the website.


They added that the problem of cash flows and interest rates was a hot topic during the week.


"The cause of rising interest rates and the scarcity of money was attributed to tight money supply of the central bank. The results of the tight monetary policy have not led investors to expect a bright outlook, especially in the stock market."


Foreign investors were net sellers last week. The total net value was VND216.5 billion ($10.3 million), of which over VND222 billion ($10.6 million) was net sales on the southern bourse and VND4.5 billion ($3 million) was the value of net buys in Ha Noi.


With the two last sessions showing a strong rally, however, risks have reduced this week, according to the website.

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