Local losses predicted on uncertainty over China stocks

Traders work at VP Bank's stock exchange floor. Vietnamese shares fell sharply last week due to the big collapse of Chinese stocks. - VNS Photo Truong Vi

Experts believe the losses are continuing to unnerve local investors, Sai Gon Ha Noi Securities Corporation (SHS) wrote in its weekly forecast.

The forecast came after Vietnamese shares declined on Friday on both local exchanges to end the first trading week of 2016. The benchmark VN Index on the HCM Stock Exchange dropped 0.9 per cent to close the week at 560.05 points and fell 3.3 per cent last week.

Meanwhile, the HNX Index on the Ha Noi Stock Exchange lost 1 per cent to finish the week at 76.41 points. Further, the northern index was down 4.4 per cent last week.

The fall of Viet Nam's stocks came after investors were worried about the sharp fall of Chinese stocks due to a slowdown of the second-largest economy, which forced China's stock markets to close twice last week.

The slowdown of China's economy also forced its central bank to weaken the Chinese yuan by 0.5 per cent to a five-year low to boost local production and competitiveness. A weaker yuan will hurt other economies, including Viet Nam.

Foreign investors tried to sell their stock assets in emerging markets, including Viet Nam, amid fears they could suffer losses in local stocks, as the Vietnamese dong could be placed under pressure due to problems in China's economy and stock markets.

In order to cope with unexpected moves in China's stock market, Viet Nam's central bank last week applied a flexible and changeable reference point for its exchange rate between the dong and the US dollar. The reference point rose VND19 to stand at VND21,909 on Friday.

Meanwhile, a weaker Vietnamese dong hurt financial firms, including banks, insurers and brokerage companies. Vietcombank (VCB) lost 3.9 per cent, insurer Bao Viet Holdings (BVH) declined by 1.9 per cent and brokerage firm Sai Gon Securities Incorporate (SSI) fell sharply by 10.8 per cent last week.

Other large-cap stocks that also declined and pulled the markets down included dairy producer Vinamilk (VNM), which fell 4.7 per cent, food and beverage firm Masan Group (MSN), which lost 1.3 per cent, and software provider FPT Corporation (FPT), which was down 4.1 per cent.

In addition, local energy stocks were hurt after the US benchmark crude West Texas Intermediate (WTI) fell 10.5 per cent during the first trading week of the year to a 12-year low of US$33.16 per barrel.

Also, PetroVietnam Gas Corporation (GAS) lost 3.3 per cent, PetroVietnam Drilling and Well Services Corporation (PVD) fell sharply by 13.6 per cent and PetroVietnam Technical Services Corporation (PVS) dropped 11.4 per cent last week.

The national stock market last week traded an average of nearly 165 million shares each session, worth VND2.3 trillion ($102 million), which was a slight decrease in trading volume and trading value from the final trading week of 2015.