Encouraging signs in a discouraged stock market

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April 10 – The Vietnam index, among the world’s worst performing, is nonetheless showing some encouraging signs for both the short and long term.

Although it has lost approximately 40 percent of its value so far this year, as the central bank continues to tighten money supply in a bid to curb inflation, Vietnam’s stock market climbed almost two percent yesterday. The rise resulted from a regulation increasing the intraday share trading band to two percent.

That increase should improve liquidity which dried up after the band was reduced to one percent ten days ago, from a previous five percent limit. This rise is seen as a sign of increased confidence in Vietnam’s ability to deal with the symptoms of its explosive growth.

Analysts and fund managers outside of Vietnam appear to concur, judging from the 2008 Through the Eyes of Foreign Investors Conference, held in Ho Chi Minh City last Friday. The approximately 100 companies listed on Vietnam’s two stock exchanges were projected to increase profits by 30 percent, with a corresponding climb in earnings per share of 12 percent.

These estimates would not match the markets’ performance for 2007, but demonstrated a strong probability of medium to long term potential. Current low share prices and price-to-earnings ratios were cited as opportunities rather than warnings at the conference, for those committed to long-term investment in Vietnam.

Foreign investors seem to be taking heed. They bought nearly US$250 million worth of shares this March.