Breath held for new inflation stats

The VN-Index closed last week at 445.21 points, or down 3 per cent from previous week. The HNX-Index, meanwhile, closed at 111.31 points on October 22, or 7 per cent lower than the previous week.

Market analysts said as third quarter’s corporate earnings might not be as good as expected, investors were waiting on the sidelines for October’s inflation news, which would be released early this week, to decide their next move.

Pham The Anh, chief economist with Thang Long Securities (TLS), said September’s consumer price index (CPI) month-on-month growth at 1.31 per cent  was surprising. “But, it had been reasonably forecasted based on seasonality and on the Vietnamese dong’s 2.01 per cent depreciation in August, raising concern about tightening policies,” he said.

“Our forecast models suggest that on-month CPI hike in October should be around 0.4-0.6 per cent,” said Anh, adding that inflation pressures would also be a factor that negatively influences efforts to lower interest rates in the economy. “This would eventually cause difficulties to firms in the first half of 2011,” he added.

Ho Chi Minh City Securities Corporation’s  (HSC) analysts said that the outlook for this month’s inflation was mixed, forecasting October’s CPI to see a 0.6-0.8 per cent increase on-month and for 2010’s inflation to come in just above 9 per cent. “This is a slight acceleration following a number of months of fairly strong credit and M2 growth,” said Fiarch MacCana.

Saigon Securities Incorporated (SSI) analysts predicted Vietnam’s October CPI to rise 0.7-0.8 per cent.

Le Chi Phuc, Saigon Invest Fund Management Company’s investment director, said if October’s CPI hike was below 0.7 per cent, it was positive for the market’s outlook. However, it was negative if the number was 1 per cent upward.

Pham Thai Binh, chief analyst at PetroVietnam Securities Incorporated (PSI), said Vietnam’s economic picture was not bright as inflation remained a concern, causing more challenges for the equities during the past 12 months.

“The domestic market is still in a long consolidation trend, starting in October 2009 [a peak 630 points] and this trend might last for the next quarters,” said Binh.

MacCana added that increased macroeconomic uncertainty coupled with the tough demand and supply situation in the local stock market would rattle stocks in the short-term. “Of course things are not bad as current low valuations look fairly attractive longer-term.”

TLS deputy general director Quach Manh Hao said “given current macro perspectives, TSL’s model suggests lowering the average year end forecast for the upside from 515.11 to 469.50 points to reflect the risks that the economy and the stock market have been facing.”