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Capital Markets

Vietnam: Investors look for the bottom as markets plunge

Vietnam’s stock markets are experiencing wrenching volatility as market rumours, inflation-curbing rate increases and a lack of positive economic data take their toll. On May 18 the Ho Chi Minh City exchange’s VNIndex dropped 2.03% to 454.91 points, the most it had in a single day since mid-March. Since then markets have continued to be volatile, with several consecutive days in May in which over half of the stocks in the market were at or near the limits of their trading bands (after which trading is suspended). Several factors are contributing to the unusual amount of volatility.

Chief among them is the rumour that Vietnam’s regulator, the SSC, might be considering a change to the composition of the VNIndex. This would address a long-standing problem in Vietnam, that the index does not reflect the full universe of investable stocks but rather is weighted towards a few heavyweight companies.

Marc Djandji, director, research department, at Viet Capital Securities, says: "In the long term this change would be positive for the market in that if the index were calculated on free float it would better reflect the true sentiment of investors. But for now there is a lot of uncertainty."

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