The listed stock market of Vietnam has evaporated US$16 billion in its market value since the start of this year, and has dived too far below any expected bottoms, the Thoi Bao Kinh Te newspaper reported citing the World Bank report at the informal mid-year CG meeting in Sapa in early June.
As of June, the total capitalization of Vietnam's two bourses is estimated to account for only 17 per cent of the country's GDP, less than half of that in December 2007.
The market saw a boom between 2006 and March of 2007 with the market value on the two bourses reaching nearly US$29 billion, or 40 per cent of GDP, versus US$1 billion, or 1.2 per cent GDP in 2005.
The government's tightened credit policy as part of its determination to curb inflation has made prices to fall in the downtrend, and reduced capital inflow into the stock market since summer of 2007, the WB claimed in its report.
The bank said the decline reflects a necessary correction of the market after a long overheated growth period, but it does not appear to be based on the market's underlying fundamentals.
By the end of May, the average P/E ratio was estimated at 10 in Ho Chi Minh Stock Exchange and only 6-7 in Hanoi Securities Trading Center. In order to break the free fall, the authorities narrowed the daily trading band at 2 per cent on HOSE and 3 per cent on HASTC, which has reduced the liquidity on the market.
The reduction has hindered commercial banks which gave big loans to securities investors previously, the WB said, referring to their offload of collateral shares over the past time.
The government's packages of measure prove effectiveness, which is needed to recover the stock market, the WB said.
High CPI in May was mainly attributed to a "rice fever". But non-food prices and trade deficit have abated since March. The two indexes are forecast to fall in coming months, according to the report. (Vneconomy, Labor)
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