Vietnamese shares fell sharply on both local exchanges on Friday, ending a three-day rally. — VNS Photo Doan Tung

HA NOI (Biz Hub) — Vietnamese shares will likely fluctuate around 570 points as foreign exchange rates continue to put pressure on the stock market after the US central bank raised its benchmark interest rate by 25 basis points on Wednesday, Maritime Securities Incorporation (MSI) wrote in a report.

The US's rate hike will likely strengthen the dollar against the Vietnamese dong, which may force Viet Nam's central bank to depreciate its currency further to keep the country's economy and exports competitive on the international market.

Analysts have expected that Viet Nam's central bank will depreciate its currency by 3 per cent to 4 per cent next year. The commercial banks traded the dollar on Friday at the ceiling of the central bank's trading band at VND22,547 per dollar while the unofficial market rate was VND22,750 a dollar.

The depreciation of the Vietnamese dong will benefit local exporters, such as garment and textile producers, as their products will become cheaper compared to their competitors while local importers, such as plastic companies, will suffer as they have to spend more money to buy production inputs from overseas suppliers.

However, as the central bank has not made any announcement yet on the foreign exchange rate, the stock market will continue to face foreign selling.

Foreign net selling is the one of main causes that has pulled the market down recently. The benchmark VN Index has lost over 6 per cent in the past 30 days due to uncertainty over the US central bank's decision and the prolonged net selling streak by foreign investors, with total net outflow of VND2.53 trillion (US$112.4 million) since November.

Vietnamese shares fell sharply on both local exchanges on Friday, ending a three-day rally. The benchmark VN Index on the HCM Stock Exchange dropped 1.6 per cent to close at 568.18 points and the HNX Index on the Ha Noi Stock Exchange lost 1.3 per cent to end at 78.29 points.

The southern index had gained 2.6 per cent in the previous three days before Friday and the northern index had risen 0.7 per cent during that time. However, the Friday slump pulled the northern index down by 1.2 per cent over a week while the southern index ended 0.8 per cent higher than the previous week.

Foreign investors on Friday sold the biggest stocks on the market such as Vietcombank, the Bank for Investment and Development of Viet Nam (BIDV), Bao Viet Holdings and Vietinbank after these big stocks had made big gains in the previous sessions.

Vietcombank (VCB) lost 6.4 per cent after it had gained 6.8 per cent in the previous five days, BIDV (BID) was down 0.9 per cent after increasing by 7.5 per cent during two days before, Vietinbank (CTG) dropped 1.6 per cent after having risen 6.2 per cent in three days and Bao Viet Holdings (BVH) fell 5.7 per cent after it had gained 7.3 per cent in two days.

In addition, local energy firms continued to suffer from lower global oil prices. The US benchmark West Texas Intermediate (WTI) ended last week's trading with a fresh seven-year low at $34.73 a barrel, a decrease of 2.5 per cent from the previous week.

The biggest energy companies included PetroVietnam Gas Corporation (GAS), which dropped 2.1 per cent over a week, and PetroVietnam Drilling and Well Services Corporation (PVD), which fell 8.4 per cent from the previous week.

Last week, the stock market traded a daily average volume of 177.2 million shares worth VND2.96 trillion ($132 million). — VNS