VietNamNet Bridge – Continuous foreign buying last week helped cushion the market fall, but escalating tensions between Viet Nam and China is expected to impact the stock market in the short term.

The pessimistic market outlook has prompted many investors to offload shares while securities companies have also sold shares pledged as collateral to curtail losses.

On the HCM Stock Exchange, the VN-Index lost a cumulative 2.38 per cent over the week, closing at 529.49 points on Friday, while the HNX-Index on the Ha Noi Stock Exchange decreased 2.53 per cent during the period, ending the day at 72.31 points.

Pessimistic market outlook prompted many investors to offload shares while securities companies also sold shares pledged as collateral to curtail losses.

Large-cap stocks bore the maximum brunt as most blue chips on both the exchanges plummeted. They were PV Gas (GAS), Vinamilk (VNM), Bao Viet Holdings (BVH), VinGroup (VIC), Vietcombank (VCB) and BIDV Bank (BID) on the HCM City market; Sai Gon-Ha Noi Bank (SHB), Kim Long Securities (KLS), PetroVietnam Construction (PVX), Vinaconex (VCG) and Asia Commercial Bank (ACB) on the Ha Noi bourse.

However, low share prices also attracted plentiful bargains, which pushed the trading volumes up on both the exchanges.

The daily trading volume on the HCM City Exchange rose 7.6 per cent as compared to the previous week, reaching 104.5 million shares worth over VND1.55 trillion (US$73.5 million), while the volume on the Ha Noi market also increased 8.8 per cent, averaging 61.6 million shares, worth VND503.5 million ($23.9 million).

"Complicated developments in the East Sea will continue to be an uncertainty factor for the market in the near future. The market tends to rebound when the Index inches close to 508 points, thanks to bargain fishing, but cautious investor sentiment can lead to a fragile market," noted Nguyen Van Quy, an analyst at FPT Securities Company.

Quy remarked that liquidity had dropped in the last trading sessions and warned that this can be a bad sign for the ongoing recovery trend.

Information regarding nationwide demonstrations by workers to protest China's hostile act in the East Sea created a sense of panic among the local investors and many of them rushed to sell shares in the middle of the week, but steady purchasing by foreign investors cushioned the losses.

During this time, continuous buying by foreign investors was a major support for the market and helped allay investor worries, Quy claimed, adding that foreign buying constituted 20 per cent of the total market volume in several sessions.

Foreign investors bought a net value of VND1.133 trillion ($53.7 million) worth of shares on the HCM City Exchange during the week, focusing on blue chips, such as Hoang Anh Gia Lai Group (HAG), PetroVietnam Drilling and Well Services (PVD), and Hoa Phat Group (HPG).

Foreign investors were also net buyers on the Ha Noi bourse, picking up shares worth a combined total of VND215.1 billion ($10.2 million).

According to many analysts, local investors have overreacted to information on the Viet Nam-China waters dispute, resulting in steep declines in share prices, which led to heavy foreign buying.

Source: VNS