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VietNamNews

Fears of slowed growth weigh on shares

Update: June, 04/2012 - 10:04

HA NOI — The VN-Index closed on Friday at 428.80 points, a decline of 1.5 per cent compared to the previous week. The average value of trades on the HCM City Stock Exchange topped VND898 billion (US$42.7 million) per session , a decline of 25.2 per cent, on an average daily volume of 56.8 million shares.

The VN30 Index, tracking the exchange's leading shares by capitalisation and liquidity, retreated 1.7 per cent to 505.65 points.

On the Ha Noi Stock Exchange, the HNX-Index dropped by 1.64 per cent from the previous Friday's close to 74.36 points. The value of trades averaged over VND399 billion ($19 million) per session, a drop of 27 per cent from the previous week, as demand for stocks declined across the board and sellers lost patience, selling at low prices to cut their losses.

Clouds continued to gather on the economic horizon, casting a pall over investor moods. The nation's credit growth this year could shrink to around 13 per cent, a report by HSBC predicted last week, while the World Bank's country director for Viet Nam, Victoria Kwakwa, has forecast that economic growth could slow to about 5.5-5.7 per cent.

The Purchasing Managers Index, tracking the Vietnamese industrial sector, fell to 48.3 points in May from 49.5 points in April, its lowest level in three months. The index reflects the health of the manufacturing sector, and the decline could suggest adverse impacts on growth. Inventories also remained high.

However, investors could take solace in the Government's determination to curb inflation and cut borrowing costs. The deposit interest rate ceiling has been reduced to 11, with a further decrease in the cards. Gas prices were also reduced last Friday.

"The control of inflation and interest rates is on track," said Maritime Bank Securities Co analyst Tran Quoc Hoan. The current problem was to stimulate consumption and tackle the difficulties of businesses, he said.

State Bank of Viet Nam deputy governor Le Minh Hung said that the reduction in the deposit rate ceiling was just a short-term measure, but he confirmed that the central bank's flexible operations had brought about some positive results such as a surplus in the current account balance and balance of payments, a stable interbank exchange rate, and increasing trust in the dong.

The market this week would likely tread water, with low trading volumes, Hoan predicted. Liquidity was still weak, showing that money was being withdrawn from the market.

"The appropriate strategy is in-depth investment, and there is an opportunity for medium- and long-term investors to find good fundamental stocks with reasonable prices," he said. ­— VNS

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