Market holds its breath to wait for IPO

October seemed to be the wait-and-see month of Vietnam’s stock market after the September of strong recovery.

From early September to October 2, the VN Index rose by 16%, hitting the 1,100 point threshold. However, after that time, the index stopped increasing, hovering around 1,100 points. Blue chips in October saw the sold volume bigger than the purchased volume since investors focused on medium-class share items.

HSBC’s report pointed out that there were four reasons that made Vietnam’s stock market less bustling while regional markets keep growing.

First, Vietnam’s inflation rate increased sharply to 9.3% in October, thus raising the concern among investors that the Government would tighten monetary policies.

Second, the share prices have become less attractive after the sharp increases in September. Supposed that the EPS growth rate would be 30% in 2007 and 20% in 2008, the PE index would be 23 for the next 12 months, still lower than the highest peak of 29 seen in January 2007; however, the share prices are still at high levels.

Third, several companies have been applying stricter regulations in issuing additional shares, and they have seen negative impacts of the measures on their shares.

The fourth and main reason is that investors still await the IPO of Vietcombank, which is believed to set up new price levels for the market. If the bank’s IPO takes place as scheduled, there would be 5-6 other IPOs in the coming months.

Foreign capital flow increasing

Finally, Vietnam’s stock market has appeared on the radar screen of leading international financial investment institutions.

The trading volume on the market has been increasing considerably in the last few months. The total trading volume at the Hanoi Securities Trading Centre (HASTC) and HCM City Stock Exchange (HOSE) exceeded the $100mil/day level in October, except for two days. The figure could not be reached prior to the last day of September. If considering the liquidity, the figure means that the scale of Vietnam’s stock market now is big enough to be in the global investment funds’ sphere.

That explained why the foreign capital flow into Vietnam has exceeded the $150mil level in October, making October the month that saw the highest foreign capital flow so far, except January 2007, when foreign investors injected $345mil in Vietnam’s stock market. The successful equitization process in Vietnam may be the main reason that made big financial institutions valuate the stock market there highly.

Source: TBKTVN.