Over the past weeks, domestic and foreign market experts and analysts kept warning Vietnam of the over-heated development of the stock market that could lead nowhere. Despite their warnings, investors continued pouring their money into the market only to see a sharp fall in the stock market on March 14. Many investors lost billions of Vietnam Dong in a day, even in two hours after the HCM City and Hanoi Securities Trading Centres closed. In HCM City, as many as 86 out of total 107 shares listed on the bourse slumped. In Hanoi, 69 out of 86 shares listed on the bourse dropped, except for several shares which rose slightly or remained unchanged in value. Many blue chips such as BVS, BMI, S99, FPT, SJS, HRC, PPC, BMP, DHG, BMC and UNI, shares of lower prices such as AGF, BBC, BPC, COM, TTP and TYA and even those worth dozens of thousands of Vietnam Dong each also slumped. 

Over-heated development

The Vietnamese stock market is developing in an over-heated manner with an emerging “bubble” phenomenon. Over the past weeks, investors feverishly rushed into the stock market, triggering a sharp jump in share prices. However, they didn’t take into account the P/E index based on the operation efficiency of enterprises and the demand for their shares listed on the bourse. In fact, the stock market had recently seen an increased transfer of shares among investors due to price margins and, as a result, prices were driven up to the peak benchmark. Normally, as a rule, when shares slumped to their real value due to different factors, shareholders would be losers in the end. On March 14, BVS sagged VND36,000/share, FPT dropped VND30,000/share, SJS plummeted VND19,000/share and S99 fell VND16,900/share. 

According to the State Securities Commission (SSC)’s report to the Prime Minister, by March 2007 the Vietnamese stock market saw 193 companies listing shares on the bourse at a total value of over VND371 trillion. On average, a trading session was valued at VND869 billion, a four-fold increase compared to 2006. The number of investors also rose sharply, reaching more than 158,000, or a five-fold increase against 2005. 

A growing imbalance between supply and demand

At a recent working session with the Prime Minister, SSC chairman Vu Bang said the Vietnamese stock market has revealed certain shortcomings, including a big imbalance between supply and demand which poses a risk of “bubble” in share value. In fact, he said share prices rose by 144 percent in 2006 and 50 percent in the first months of 2007. Many domestic investors who stuck to short-term investment plans and new investors who were not well aware of the stock market suffered losses due to large fluctuations in share prices.

According to Mr Bang, the stock market recently attracted many inflows of capital, including from banks but failed to meet investors’ requirements in terms of transparency and equality in its operation. The fall on the stock market on March 14 showed that Mr Bang’s judgments were not groundless. Shares would continually fluctuate to return to their real value in the coming days, said market analysts, adding that by that time a healthy stock market will be regularly taking shape in Vietnam and investors will learn how to avoid risks.