Stock market last week saw the worst fall in the year to date amidst signs of production stagnancy.
Investors dumped their holdings throughout the week and the benchmark VN Index slipped 9.4 per cent and the HNX-Index fell 9.52 per cent. Liquidity shed more than 25 per cent on both bourses against previous week.
Market participants claim the market is ending its “hot” rising tide as fresh economic fears take gold despite fresh stimulus attempt by the government. Hapaco director Vu Xuan Cuong shared the pessimistic mood with an online conference named “Finding opportunities for stock investors”.
The conference, organised late last week by Dau Tu Chung Khoan (Securities Investment) – a Vietnamese language sister newspaper of VIR – is an online dialogue between some listed firms and the public.
Cuong said the payment delays for value added tax (VAT) and corporate income tax (CIT) under the government’s stimulus package “can only deal with short-term problems of enterprises. “The State Bank’s policy to cap lending interest rates at 15 per cent for the production sector was of little use.”
While the lower 15 per cent lending rate is now on offer, enterprises can hardly access loans due to banks’ strict lending criteria. Enterprises are also struggling with low sales and high inventory levels, which cut into their borrowing demand.
Bao Viet Holdings, meanwhile, is trying to cut its operating costs in an attempt to improve the firm’s profit. Bao Viet’s operating director Hoang Viet Ha told the dialogue his firm had cut about $1.6 million of operating costs within the first quarter, in an plan to cut 5-10 per cent in costs during the year.
Amid economic difficulties, real estate companies seem to suffer most. Trinh Van Quyet, chair of FLC Group (FLC), said the sector faced weak liquidity, in which investors stayed on the sidelines waiting for new movements.
“Capital for business [of real-estate companies] is drying out,” Quyet said. “Meanwhile, the changes in economic policies are still in the first stage and need long way to positively affect the market.”
IDJ director Tran Trong Hieu claimed the most important policy in an economic downturn was “safeguarding assets, not making profit”.
Merger and acquisition has emerged as a prominent trend and pharmaceutical Traphaco chair Vu Thi Thuan said her firm was mulling plans to acquire same-sector companies, after Traphaco completed purchasing a 25 per cent stake in competitor Dak Lak pharmaceutical firm last month.
Quyet of FLC Group said FLC Land was being merged into FLC in third quarter, with hope that “FLC will increase competitiveness thanks to an increase in financial capacity and assets.”
Given the troubled economic situation, company managers said it was difficult to guarantee stock prices. “At the moment, I do not want to say anything about whether the stock price is high or not, because there are still loss-making companies out there but their stock price might still rise,” Cuong of Hapaco said.
Trinh Hoai Giang, deputy general director of HCM City Securities Company said: “The economy is showing signs of difficulties like negative credit growth, stagnant production and tumbling aggregate demand,” adding that European risks are likely turning into “a fresh widespread and deep crisis”. “The worst case is that the Vietnamese economy can turn bad in line with the global economy in next quarters. I think the risks facing us in next quarters are remarkable,” he said.