Market’s million dollar question

The index has fallen almost 30 per cent so far this year, the biggest plunge in Asia.
The VN Index was also down 44 per cent from its peak of 1,174 points in March 2007. Equity strategists said this week was another difficult week for investors and it is understandable why there was so much pessimism surrounding the market.

“Our recent discussions [with fund managers and retailers] have revealed their bearish sentiments on outlook,” said King Yoong Cheah, Mekong Securities’s head of research.
Cheah said that besides the increased external uncertainties about the US recession and high oil prices which continue to reduce investor’s appetite for risk, the continued tightening of monetary policies to counter escalating inflation was largely blamed for the sharp downturn.

“The continued monetary tightening has raised concerns that these measures could slow down economic growth and drain significant liquidity from the equity market,” Cheah said.
He added that the continued switching of funds from the equity market to the booming property and gold markets were also dampening confidence.

“The million dollar question that we are frequently encountering is whether the market has reached its bottom, therefore provide a buying opportunity, or whether the Vietnamese equity market will continue to perform poorly,” said Cheah.

Johan Kruimer, Ho Chi Minh City Securities Corporation’s (HSC) deputy CEO and head of brokerage said confusion was still the word on the trading floor and uncertainty could be translated into lower prices of assets.
“Prices could start to recover a bit over the coming days, but even at these levels, volatility and risk are likely to stay high in the foreseeable future,” said Kruimer.

“[Investors’] success or failure is rather more likely to be determined by the market’s actual performance during March,” said Kevin Snowball, director of PXP Vietnam Asset Management Limited.

Cheah said for investors with a long term investment horizon, the current market weakness warranted some bargain hunting and at the present level, the market has limited downside risk.