HA NOI — The stock market last week saw its heaviest fall of the year, with stocks plunging in the wake of the arrest of two banking tycoons facing accusations of financial fraud.
On the HCM City Stock Exchange, the VN-Index dropped 8.6 per cent from the previous Friday's close. The average daily value of trades jumped to VND967.5 billion (US$46 million), an increase of 33.5 per cent over the previous week, as the banking scandal threw investors into a panic and caused heavy sell volumes.
On the Ha Noi Stock Exchange, the HNX-Index plummeted 10.7 per cent, falling to just 63.11 points. The value of trades averaged VND445.2 billion ($21.2 million) per session, almost double the preceding week's figure.
Nguyen Duc Kien – along with his wife, who holds a 10-per-cent stake in Asian Commercial Bank (ACB) – was arrested for illegal activities involving three of his companies last Monday.
On Thursday, investigative police then apprehended ACB general director Ly Xuan Hai. Hai has been accused of receiving bank funds totalling billions of dong from 19 bank personnel and depositing them in an outside credit institution.
The news has caused a run on the bank. With support from the State Bank of Viet Nam, ACB has drawn together VND15 trillion ($714.2 million) in cash to pay to depositors withdrawing funds.
"The incident is just an individual case, and the banking system and listed companies are not involved," said State Securities Commission chairman Vu Bang. "However, I do not exclude the possibility that stock prices have been manipulated."
With a 5-7 per cent decline each session, manipulators have taken the opportunity to accumulate larger holdings of shares, he added.
A number of brokerages last week ceased margin trading on several bank stocks to reduce risk, suspending lending to clients on to trade on margin in shares of commercial banks such as ACB, Sacombank (STB), Eximbank (EIB), Nam Viet Bank (NVB) and Sai Gon – Ha Noi Bank (SHB).
In three days of tumbling last week, the Vietnamese stock market lost capitalisation totalling $5.6 billion. However, the market strongly recovered on Friday as prices had declined to a level making them attractive to investors.
"Bottom fishing appeared sooner than we expected," said Kim Eng Securities Co Nguyen Hoai Nam. "But it also means this rally from the latest low is not as positive as previous models."
Foreign investors moved late in the week to pick up shares at bargain prices. They were attracted to such leading blue chips such as Phu My Fertilisers (DPM), PetroVietnam Gas (GAS), Da Nang Rubber Co (DRC), and property developer Vingroup (VIC), as well as shares in banks not yet touched by scandal, including Military Bank (MBB) and Vietcombank (VCB).
Net buys by foreign investors last week totalled VND343 billion ($16.3 million), their highest level in recent months.
VietCapital Securities Co analyst Nguyen The Minh predicted the market might continue to struggle this week because of existing short-term risks and strong sell pressures. However, he said, last Friday's session was a savior, helping the market avoid greater declines and a loss of liquidity.
"Investors who can accept a certain risk may want to buy some blue chips and restrict the use of leverage at this time," Minh suggested.
Gold prices also spiked last week as domestic investors shifted capital away from the stock market. Gold rose by VND1.7 million ($81) per tael last week, reaching VND44.85 million ($2,100), their highest level since April and exceeding world prices by VND2.8 million ($133). (One tael is equivalent to 1.2 ounces). — VNS