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Analysts' picks

Viet Nam's stock exchange has loved a lengthy, four-month winning streak, by the finish of April became certainly one of the 2010 quickest growing marketplaces on the planet. Traders were happy and investment funds were positive, with enhanced internet resource values.

Positive signals in the stock exchange appeared a good proof of the Government's economic guidelines. However May showed up.

For traders, May is known for the old saying, "Sell in May and disappear.Inch However, using the VN-Index reaching a current peak of 492.44 points, nearly everybody had forgotten the old saying. Landmarks of 500 and 600 points were frequently pointed out.

However the unpredicted happened. In eight consecutive periods beginning May 9, the VN-Index lost over 10 percent of their value.

Hoa Binh Investments Co experts have credited the plunge to 3 factors. First, the stock exchange has risen for any lengthy period with no significant adjustment and also the prices of numerous shares were no more deals. Second, the optimism of traders had progressively been eroded by concerns that economic growth had gone stale. The central bank's efforts to cap lending rates of interest weren't viewed as extremely effective as the amount of companies confirming deficits, halting production or filing personal bankruptcy had elevated significantly.

Finally, the troubled global economy, made worse through the eurozone debt crisis, had forced many foreign traders to withdraw capital from emerging marketplaces. In Viet Nam, people from other countries in May continuously offered large-cap stocks which considerably affected the actions from the VN-Index, including shares of Vietcombank (VCB), insurance provider Bao Viet Holdings (BVH) and property developer VinGroup (VIC).

Within our opinion, the continuous sales by foreign traders were the main cause. And that we predict that Viet Nam's stock exchange continues to manage a powerful wave of capital divestments by foreign investment funds this season.

Dragon Capital's VGF and VEIL funds, the combined assets which arrived at US$628 million in May, presently control substantial holdings such blue chips as BVH, VIC, mixer Masan Group (MSN), developer Hoang Anh Gia Lai Co (HAG), Phu My Fertilisers (DPM), software giant FPT and Military Bank (MBB). These stocks are likely to be prone to approaching sales by these funds.

Based on some fund managers, the current additional report on 1.78 billion shares by Vietcombank (VCB), which makes it the key share available on the market, along with the report on PetroVietnam Gas (GAS), has affected the restructuring of investment portfolios by exchange-exchanged funds (ETFs).

The most recent data from Bloomberg implies that cash is being drawn from emerging marketplaces worldwide, adding up to $5.1 billion in only 1 week from May 10-16 in 12 nations and areas. In Japan, $1.92 billion was withdrawn throughout the time, while over $1 billion was drawn from marketplaces in Taiwan and Columbia, $573 million from South america, nearly $300 million each from Australia and Mexico, and $156 million from China.

In Viet Nam, foreign investment funds have withdrawn $2.4 million forever of the year. According to rates, Viet Nam could top their email list for foreign divestments.

In the present economic context, the stock exchange continues to be a stylish investment funnel. But, after May's sharp fall, many traders have grew to become more careful about the way forward for the marketplace. The influence of blue chips and demands behind actions by investment funds ought to be carefully supervised.

In June, the marketplace is forecast revisit equilibrium and share prices will fall to reasonable levels. Economic guidelines, together with a stimulus bundle for companies, lower rates of interest, minimizing fuel prices, will also be likely to help stimulate the marketplace within the coming several weeks.