Markets press to regain momentum

March 17, 2020 | 08:00
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The furious falls in share prices have marked the worst week in decades for Vietnam’s stock exchange, pushing the local bourse alongside foreign ones into bear market territory.
markets press to regain momentum
Markets press to regain momentum, illustration photo (Source:shutterstock)

On last Friday’s trading session, the VN-Index tumbled 7.47 points to 761.78 points. The Hanoi Stock Exchange (HNX) meanwhile lost 0.54 points to close the week at 101.38 points.

Foreign investors continued their heavy sell-off trend, focusing on Hoa Phat Group (HPG), Masan Group (MSN), and Vinhomes (VHM).

Selling was broad-based, with some airlines, oil and gas, and retail firms showing especially large declines. Nine out of 30 constituents of the VN30-Index reported heaviest selling, while almost no share produced positive signs as of March 14.

Shares of banks like BIDV, Techcombank, and Vietcombank hit their lower limit, suffering steeper losses than the broader indexes. Meanwhile, some large-cap stocks such as Mobile World Group (MWG), Phu Nhuan Jewelry (PNJ), and Bao Viet Holdings (BVH) also slumped 7 per cent – the hardest hit in this session.

Specifically, stocks collapsed after a female staff member of electronics retail chain Dien May Xanh, a subsidiary of MWG in the central city of Danang, tested positive for COVID-19 after communicating with two infected British tourists. All other staff at the store have self-quarantined and the reopening date remains unknown.

Last Wednesday’s stock market declines accelerated after the World Health Organization (WHO) declared the disease a pandemic and said it was “deeply concerned by the spread and severity” of the virus and by “alarming levels of inaction.”

The stock declines followed a dizzying amount of new information from the WHO about the economic fallout of COVID-19.

The selling has been so indiscriminate that even the technology stocks that had carried the bull market for much of its run have sunk, with FPT and CMC declining sharply.

Last Monday, the local bourse saw the largest decline measured over the course of a single day since 2001 as financiers grow fearful of the economic fallout, coupled with the global oil price war.

Due to a dispute between the members of the Organization of the Petroleum Exporting Countries and Russia, oil and gas became the worst-hit sector, with PetroVietnam Transportation and Vietnam National Petroleum experiencing steep losses.

Previously, the airlines sector announced cutting flights, parking planes, freezing hiring, and reducing executive pay to deal with the spread of the outbreak.

Market observers stated the flight out of equities and into safe havens underscores the panic felt by some investors who see few places to hide in a stock market selloff that has accelerated as the number of COVID-19 cases increased to 48 cases as of March 14.

On Friday, the US stock market posted its best day since 2008 after US president Donald Trump declared a national emergency.

The S&P 500 closed over 9 per cent higher thanks to a late rally during Trump’s speech. The Dow Jones also surged, ending 9.36 per cent higher with a gain of 1,985 points, easily its best day ever in points terms.

Notably, on March 12, both indexes previously suffered drops of 7 and 10 per cent, respectively – for the Dow, the worst day since 1987.

Meanwhile, some optimistic shareholders are viewing the massive rout as a buying opportunity.

Last week, Tran Van Dung, chairman of the State Securities Commission, announced support measures in a speech given to calm investors. Measures will include a cut to service fees and easing of margin trading rules.

Additionally, a possible upcoming rate cut from the State Bank of Vietnam would be a green light for investors to pour cash in, since they believe that Vietnamese authorities are doing their best to cushion the downward spiral of domestic economy.

Furthermore, regulators also shortened approvals for treasury stock buybacks from seven to one day.

“As the pandemic prevails throughout the world, investors should stay on the sidelines at this moment,” noted Chau Bui, analyst at Mirae Asset Securities.

“The environment is so fluid right now and there’s so much uncertainty that it’s tough to point out where to put money in specific stocks,” Phan Dung Khanh, investment director at Maybank Kim Eng Securities, told VIR. “The virus will likely continue to spread and negative headlines will weigh on the industry and potentially drive stock prices lower still.”

Market Movers

Mobile World Group (MWG)

MWG will open 700-1,000 new Bach Hoa Xanh stores in 2020. These new stores will be concentrated in the south, with the expectation of trimming operating expenses on its total revenue, currently at 5 per cent.

In addition, MWG will shorten the transportation route by operating some small distribution centres (which can serve 50-80 stores) for sectors such as fast-moving consumer goods and vegetables, instead of large distribution centres that serve more than 200 stores.

Notwithstanding, as prospects for economic growth have dimmed, MWG’s plan will not likely live up to expectations.

Masan Group (MSN)

Local food provider Masan is putting into action its four-step bond issuance plan, announcing plans for the second issuance after a successful first step a few days ago, when it released 30 million bonds.

Last week, Masan distributed 30 million bonds worth VND3 trillion ($130.43 million) in the first of four issuances it is planning to stage to whip up capital. The three-year straight bonds offer semi-annual coupons at 9.3 per cent for the first year and then pay a spread of 2.5 percentage points above the 12- month savings rate of the state-owned banks for the final two years.

COVID-19, on the other hand, has opened up opportunities for Masan to promote its Masan Meat Life as demand for food surges significantly.

By Minh Luu

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