Kien’s arrest unsettles the market

The Ho Chi Minh Stock Exchange’s (HoSE) VN-Index lost 10.17 per cent or 44.5 points within just three days after Kien’s arrest on Monday August 20.

Kien was accused of “economic violations” related to his three companies - B&B Investment and Trade JSC, ACB Hanoi Investment JSC and Asia Hanoi Financial Investment Co where he acts as chairman. Those firms reportedly run unlicensed business lines.

The market’s drop was later worsened by the arrest of CEO Ly Xuan Hai of ACB, one of the top private Vietnamese banks, and rumors about inspecting other bankers.

Investors rushed to sell out their holdings last week, ignoring fundamental factors or other positive news from enterprises. Even producing blue-chips plunged, among which Vinamilk (VNM) lost 7.3 per cent and Masan Group (MSN) lost 10.9 per cent within the first three days since Kien’s arrest.

Brokers recommended clients who use margin lending to sell stocks before being forced-sell.
“Many of my clients were puzzled. Some don’t really understand the situation but they still feared the  market’s fierce plunge,” said Hoang Quan, a broker for leading brokerage firm by market share VNDirect Securities.

The Tuesday August 21 trading session opened with the two benchmarks plummeting on vertical red lines towards the bottom. The VN-Index lost more than 4 per cent and HNX-Index lost around 3 per cent within the first 15 trading minutes. The next sessions on Wednesday and Thursday saw the whole the market almost sinking into red.

Half the stocks including bank stocks kept hitting the floor within the first three days since Kien’s arrest. Banking shares were sold the most. Some stocks like ACB (Asia Commercial Bank), Eximbank (EIB) and Sacombank (STB) saw millions of units offered each session, while very few bids were ordered.

“It’s hard to say the situation will be better or worse after those movements, but the economy must suffer flip-flops before a trend is determined,” said the general director of a local fund management firm, who declined to be named citing the sensitivity of the issue.

The State Securities Commission (SSC) on Thursday August 23 released a statement recommending investors stay calm ahead of ongoing rumours, not create grounds for market manipulation. The market watchdog also required securities companies to obey the trading regulations and “help investors to understand the situation.”

Meanwhile, securities companies like FPT Securities, Vietcombank Securities, and  foreign-backed firms like KimEng Maybank and KIS Vietnam started to stop or cut margin lending for bank stocks.

“We do so to safeguard ourselves ahead of unusual market situation. At the moment, not only investors but also securities companies ourselves and investment institutions can hardly foresee the market,” said Nguyen Van Dung, head of FPT Securities’ brokerage department.

But foreign investors last week proved somewhat more bullish than locals. They remarkably boosted up net buying throughout the week, with total net buying value within the week up to VND370 billion ($17.9 million).

Pham Ngoc Bich, head of institutional investors for Saigon Securities In. – one of the brokerage firms having largest foreign investor base, said that foreigners were “very concerned”. However, he noted that some of SSI’s foreign clients still wanted to take advantage of the market drop to buy good shares at cheap prices.

The market significantly bounced back on Friday August 24. The VN-Index advanced 6.9 points or 1.76 per cent and HNX-Index jumped 1.88 points or 3.07 per cent, while total trading value doubling against the previous session to VND1.8 trillion ($87 million). Observers said that settling down rumours, and the State Bank and State Securities Commission’s statements to calm down market concerns had encouraged investors to come back to buy-in cheap shares, although unsafe sentiment still remained.

The State Bank in a statement put on its website last Wednesday said it was committed to provide capital support to ensure ACB’s liquidity and protect ACB customers’ interests. According to Do Minh Toan, the newly-appointed general director of ACB who replaced Ly Xuan Hai, ACB’s liquidity was under control and back to normal at the end of last week.

Kien is a founder of ACB and former vice chairman of the bank’s board of directors. Some local newspapers reported that Kien and his relatives were holding nearly 10 per cent of ACB’s chartered capital. But ACB’s deputy general director Nguyen Thanh Toai was quoted as saying Kien and his relatives together held only less than 5 per cent of ACB by the end of 2011. Local media also reported that Kien had ownership at 5-7 Vietnamese banks including big private banks. The information is yet to be varified.

Kien was also chairman of Hanoi ACB football club and vice chairman of Vietnam Professional Football Company (VPF). In the tourism sector, Kien is vice chairman of Cholon Tourism Service Company and a board member of Thien Minh Tourism Joint Stock Company.