Vietnam Stock Market sees big drop in 2008

Vietnam Stock Market sees big drop in 2008 -
Modest hopes exist for more stability and some upside in 2009

2008 was a volatile and disastrous one for the Vietnamese stock market. Losses wiped out about VND270 trillion (US$16 billion) in market value, according to estimates by the Indirect Securities Company reported in the January issue of Outlook magazine. This left final market capitalization at around VND 225 trillion by year's end.

The stock market plunge in 2008 wiped out eight years of gains on the HCM City Stock Exchange and three years of gains on the Ha Noi Securities Trading Center (HASTC), the country's two stock trading centers. The VN-Index and the HASTC each declined by nearly 70 percent in 2008, one of the bigger one-year dives seen on any world stock market. The HASTC Index even fell below its starting point of 100 in late November.

Top Vietnam company shares shed immense amounts. For example, the total market capitalization of Asia Commercial Bank (ACB) dropped by 58.8 percent year-on-year to the end of 2008 at VND17.7 trillion, according to VNDirect securities report in the above cited publication. Sacombank (STB), a major Vietnamese bank, fell 67.7 percent to VND9.4 trillion, while Phu My Fertilizers (DPM) fell 53.5% to SND13 trillion.

The HCM City exchange also saw major losses plunging a stunning 80 percent from 2007 and averaging just VND463 billion ($27.2 million) per trading session and plunging to as low as VND 241 billion ($14.2 billion) per day in December 2008.

Although foreign interest had previously been considerable in Vietnam's stock exchange by the end of the year most international holders were on the sidelines. Domestic buyers also fled the market in the face of uncertainty. By the end of the year, the Viet Nam Association of Securities Businesses estimated that fully 80 percent of the nation's 102 registered securities companies were struggling to survive.

2008 also saw the process of equitising State-owned enterprises grind nearly to a halt with the number of initial public offerings (IPOs) either failing or being withdrawn because of lack of investor interest. Additionally, many already-listed companies canceled plans to issue additional shares as a means of attracting capital in similar fear to lack of interest. According to the Ministry of Finance, only 73 State-owned enterprises were equitized in 2008, representing just over one-quarter of the year's target.

In this environment of increasingly falling stocks, the State Securities Commission adjusted the daily trading bands on the stock market an unprecedented four times in an effort to prop up the market.

The Vietnamese Government's $6 Billion stimulus package is hoped to stabilize the economy in 2009 and hopefully also help build a floor to inhibit stock market volatility and the environment for some share growth in 2009 but for now no one is predicting a rapid return to market gains.