VNC Market correction and political tensions abate – cooler heads prevail

09 May 2014

 

Market correction and political tensions abate – cooler heads prevail


Ho Chi Minh City – Vietnam's benchmark VN Index experienced its sharpest decline in nearly 13 years on Thursday as tensions mount between China and Vietnam. The index was down 5.9 percent at Thursday’s close, and 13 percent off this year’s peak which occurred on 24 March.

On Friday the index closed in positive territory, reversing almost half of the previous day's losses, recovering 2.9 percent to close at 542.5 points. Blue chips led the rally as liquidity remained high at $80 million.  This was significantly less than Thursday peak of $140 million, but still above the recent average of $50 million per day.

Foreign investors have been taking advantage of Vietnam’s biggest stock-market retreat since 2001 to boost their holdings in a bet that price falls due to escalating tensions with China will prove short-lived.

Overseas money managers purchased a net $11.5 million worth of securities on the Ho Chi Minh City Stock Exchange on Thursday, the most in five weeks. On Friday, they continued the buying with an additional $6.4 million worth of securities purchased, the thirteenth net buy day in a row and well above the average of $1-2 million a day over the past few weeks.

Cooler heads prevailed as both China and Vietnam announced that they will seek to resolve the issue peacefully. Furthermore, China’s state oil company, CNOOC which owns and operates the HD981 oil platform dispatched off the coast of Vietnam, has publicly declared that the rig is on a 3-month operation, lasting from May through to July.