Hanoi: Vietnamese stocks are approaching a bear market after slumping 10 per cent the past three days as the detention of a banking tycoon sparked concern more arrests will disrupt the nation’s financial system.
The VN Index slid 4.2 per cent yesterday to the lowest level since February 1. The gauge has fallen 19.5 per cent from its high this year on May 8, close to the 20 per cent decline some investors regard as a bear market. The measure trades for 9.5 times estimated profit, the cheapest level since May 25 and 8.7 per cent lower than the MSCI Emerging Markets Index’s 10.4 multiple, according to data compiled by Bloomberg.
Asia Commercial Bank has tumbled 19 per cent since Nguyen Duc Kien, one of its founders, was arrested August 20 for what the central bank called conducting “business illegally.” A Petrotimes report on August 22 that an arrest warrant was issued for Asia Commercial’s former Chief Executive Officer Ly Xuan Hai further eroded investor confidence and contributed to the benchmark money-market rate climbing to a four-month high amid concern about a cash crunch.
“Not every stock in Vietnam by any means is going to be implicated or involved in any way in this, so there’s an opportunity for brave investors to take advantage of some very cheap valuations,” Kevin Snowball, the Ho Chi Minh City-based chief executive of PXP Vietnam Asset Management, which manages about $100 million, said by phone. “If we get some definitive news on what’s going on, that may provide a respite. But if there are more arrests, then there will be more weakness.”
Asia Commercial shares plunged 6.7 per cent yesterday in Hanoi. The stock trades for 6.1 times estimated profit, the lowest level since January, according to data compiled by Bloomberg.
Nguyen Hoa Binh, head of the Supreme People’s Procuracy, declined to comment on the Petrotimes report. Hanoi police chief Nguyen Duc Nhanh said he couldn’t comment.
The company hasn’t received any official information on Hai, who was being questioned by police after receiving a summons August 20, Deputy CEO Nguyen Thanh Toai said by phone yesterday. Asia Commercial appointed one of Hai’s former deputies, Do Minh Toan, as CEO late yesterday after accepting Hai’s resignation, according to an e-mailed statement.
Police had arrested Hai yesterday for allegedly “intentionally violating state regulations on economic management, causing serious consequences,” the state-run Vietnam News Agency reported today, citing the investigation unit under the Ministry of Public Security. Hai was not reachable on his mobile phone.
Joint Stock Commercial Bank for Foreign Trade of Vietnam, the nation’s biggest lender by market value, sank 12 per cent in the past three days. Vietnam Joint-Stock Commercial Bank for Industry and Trade, the second largest, lost 9.2 per cent. Saigon Thuong Tin Commercial Joint-Stock Bank, known as Sacombank, lost 14 per cent.
PXP’s Snowball said he bought stocks yesterday, declining to be specific. Consumer staple and agricultural companies “look pretty good,” he said. Vietnam Dairy Products Joint- Stock Co., the nation’s biggest listed dairy producer, accounts for 8.2 per cent of his $34.4 million Vietnam Emerging Equity Fund. The stock trades for 11.6 times estimated profit, the lowest level since August 8.
Overseas investors bought a net $15 million of Vietnamese equities in the past four days, headed for the biggest weekly purchases since the week to March 30, Ho Chi Minh City exchange data show. Tran Dac Sinh, the bourse’s chairman, was not reachable on his mobile phone.
“Even though stock prices have fallen, liquidity in the market has increased significantly,” the Hanoi Stock Exchange said in an e-mailed statement yesterday. Foreign investors are “not affected by psychology and took the chance to buy stock at low prices,” according to the statement.
More than half the VN Index’s 303 companies fell at least 4 per cent yesterday. The State Securities Commission urged investors to stay calm, saying it will intensify monitoring and “strictly deal” with investors who spread rumours, according to a statement on the regulator’s website yesterday.
“The Vietnam issue is more about confidence than market valuations,” said Gavin Parry, managing director of Hong Kong- based Parry International Trading Ltd. “The high probability of more high-profile banking arrests is creating uncertainty for the banking system. The central bank has stepped in to assure it will cover its liabilities.”
