VN Index to Drop 20% by Year End: VinaSecurities
Vietnam’s benchmark VN-Index, the second best performer in Asia, is likely to suffer a fall of 20% by the end of this year as the government reduces its stimulus spending, said VinaSecurities Joint Stock Co.
Vietnam offered VND17 trillion ($952 million) worth of 4% interest rate subsidies, which were originally planned to end at end-2009.
The government last week announced to extend subsidies for short-term loans to the end of March 2010 and for medium-term loans to the end of 2010, but to cut subsidized rates to 2% from 4%.
Vietnam is lowering its subsidies because most companies are showing signs of recovering, Nguyen Xuan Phuc, head of the government office, said at a press briefing in Hanoi.
The government should subsidize some loans only to farmers and companies working on production, infrastructure, education, and health care projects, Lao Dong newspaper reported, citing Phung Quoc Hien, head of the National Assembly’s Finance and Budget Committee.
Hien couldn’t be reached for confirmation.
The new decision is not good for the stock market, said Michel Tosto, senior manager for institutional sales at the Ho Chi Minh City-based VinaSecurities, the brokerage unit of VinaCapital Group which has total asset of $1.76 billion under management.
Liquidity in the stock market will drain and financials will have a very difficult time, Tosto was quoted by Bloomberg, adding that about 30% of the rally in the VN Index was caused by financial leverage. (Bloomberg)
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