Beacon needed to guide money

November 08, 2010 | 08:41
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A surplus of cash is ready to enter the equity market, but investors are waiting for clearer macroeconomic signals.

The VN-Index ended the first week of November at 457.27 points after fluctuating in a tight range

of 440-450 points within the last two months, as the market lacked catalysts to break higher.

Trading volumes also hovered at around 25-30 million shares traded on a daily basis, compared to 50 million shares several months ago. 

At this valuation, market analysts said Vietnam’s stock market looked relatively cheap compared to regional peers with a price-to-earnings (P/E) of around 10. However, investors, particularly institutional ones, remain on the sidelines.

“Cash is in investors’ trading accounts, but the majority want to wait as macroeconomic risks remain,” said Nguyen Thai Ha, Saigon Hanoi Investment Fund Management Company (SHF) equity director.

Ha said investors’ confidence was weak and they wanted clearer signals of the policy-makers’ next move, continuing a monetary loosening policy to support growth or not. “Trade imbalance, exchange rate and inflation risks are concerns.”

Ha found banking shares attractive as numerous stocks plunged to below face values. “If investors cash in now, they have a chance to have high rewards as some banks pay high dividends. Therefore, investing in stocks with high dividends could be a smart choice,” she said.

“Cash is king now, but we are still selectively buying in good fundamental stocks with high dividends,” said Ha, adding that for retail investors, it was not necessary to jump in now as opportunities were numerous.

Vo Van Minh, LienViet Securities’ research and investment advisory director, said Vietnam’s gloomy stock market was understandable as the market lacked supportive news. Exchange rate volatility caused high equity market pressures, while the high consumer price index for September and October sparked inflation concerns. 

“Investors are still keeping their money outside the market waiting for clearer opportunities. Some investors might temporarily put their money into bank savings, property or gold,” said Minh.

Pham Kinh Luan, StoxPlus’s head of research, said the government had tried to direct cash flows to the production sector, while limiting funds into markets with big speculation elements like the stock market. Thus, the market cannot fire-up until at least the year’s end.”

vir.com.vn

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