Reprieve for banks buoys markets

HA NOI — Shares rose in three out of five sessions last week on both national stock exchanges, extending overall gains on the HCM City Stock Exchange to four consecutive weeks.

Banking shares led last week's market rise, following a Government decision to delay implementation of new stricter minimum capital requirements for commercial banks.

On the HCM City Stock Exchange, the VN-Index closed Friday's session at 485.29 points, 2.59 per cent higher than the previous week's close. The average daily volume of trades reached 93.5 million shares, averaging over VND2.2 trillion (US$105.5 million) per session – an increase of 14 per cent in volume and about 4 per cent in value over the prior week.

On the Ha Noi Stock Exchange, the HNX-Index also climbed by over 2.8 per cent to finish the week at 119.70 points. The average daily value of trades rose to over VND1.4 trillion ($67.6 million) on a volume of over 71.6 million shares.

Many banking stocks shot to the top of the allowable trading band for the first three sessions of last week in reaction to news that higher minimum capital requirements wouldn't be imposed on banks for at least another year.

Although bank shares fell sharply on Thursday after Moody's downgraded the bond and foreign currency deposit ratings of six Vietnamese banks, banking shares still posted an overall average gain of 15 per cent last week.

"Listed banks are not all directly affected by this decision, so it shows the influence of this decision was mainly psychological," wrote FPT Securities Co analyst Nguyen Van Quy in a weekly market report.

However, the decision removed the bottleneck of capital restraining many banks, Quy said, and the decision was released at a time when investors were already reinvigorated.

Foreign investors were also among the heavy buyers of banking shares. They concluded last week as net buyers of VND530 billion ($25.2 million) worth of shares on both exchanges, with net buys of Vietcombank (VCB) and Vietinbank (CTG) alone reaching VND178 billion ($8.5 million).

Independent analyst Pham Viet Hung said the prices of bank shares remained relatively cheap and many investors were expecting a strong rebound in this sector next year, now that interest and exchange rate fluctuations seemed to be cooling down.

He also noted the high cash dividends that many banks were offering this year.

In the long term, the prospects for bank stocks was attractive, with price-to-earnings (P/E) ratios at around 9, below the average stock market average of over 11, Hung said.

Meanwhile, analysts with Woori Securities Co warned that transactions this week could be negatively affected by banking shares, with a large number acquired last week reaching investor accounts and many likely to sell out en masse to realise profits.

"The two benchmark stock indices could swing slightly but there still would have to be strong waves in several other groups of shares," they wrote in a market forecast.

Nguyen Quang Minh, analyst with a Noi-based financial information company, said the market this week would also receive December inflation data but suggested it would have little impact on investor psychology if it remained within expectations.

"Most investors expect the market rally will last through the end of the calendar year and this optimism could support sessions this week," Minh said.

Source: vnagency.com.vn