Vietnamese shares ended Monday on a negative note as investor confidence remained weak on global geo-political risks and incoming new regulations on margin lending rate.
The benchmark VN Index on the HCM Stock Exchange dropped 0.75 per cent to close at 1,148.49 points. It lost total 3.5 per cent last week.
The HNX Index on the Ha Noi Stock Exchange finished at 133.31 points, nearly unchanged from last week’s end of 133.34 points. It fell total 3.4 per cent last week.
More than 246.3 million shares were traded on the two local exchanges, worth VND8.8 trillion (US$390.4 million).
The market trading condition was negative with 196 gaining stocks against 241 decliners while 124 other stocks were flat.
Banks, insurance-finance companies, rubber producers, food and beverage firms, and building material providers were among the worst-performing sectors on the stock market.
According to securities companies, weak market sentiment following the latest bomb strike in Syria was the major cause for the fall of the stock market on Monday.
As investors were worried about rising tension in the Middle East, the VN Index lost as much as 1.32 per cent early Monday but somehow recovered on strong bottom-fishing.
“It was a ‘fortunate’ the US and its coalition partners attacked Syria on Saturday so that we avoided a ‘blood bath’ that could have happened if it (the airstrike) took place during a trading day,” Viet Dragon Securities (VDSC) said in its daily report.
Another factor was rumours of margin lending rate, which “negatively impacted investors’ sentiment and caused the market to fall deeply” and strong selling made the indices decrease, BIDV Securities Corp (BSC) said in a note.
The local market is concerned about a new regulation of the State Securities Commission, which was drafted in January, requiring the initial margin ratio contracted by securities companies for margin lending to be at least 60 per cent from the current rate of 50 per cent.
Margin lending is the amount of funding that an investor must personally put up from his own resources. Initial margin ratio is the portion of the purchase price that an investor has to deposit at brokers when borrowing money to purchase securities.
That also means “margin lending contraction”, referred to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker, would be at maximum rate of 40 per cent.
The proposed regulation has raised public concerns that the cash-flow into the stock market will be squeezed, thereby reducing investors’ borrowing demand due to their weaker ability to deposit at brokerages.
A tightened margin lending policy means investors would have to offload parts of assets to balance their investment portfolios, leading to strong selling pressure on the market.
In this stage, cautious investor sentiment would continue to dominate the market trading with highly risky foreign macro-economic news, BSC said. — VNS