Vietnam stocks may rise on US visit

“This is the only good news that can improve investor confidence, as it stresses a good relationship between the two countries and brings more opportunities for both economies, such as the finalisation of the Trans Pacific Partnership (TPP),” said Le Nguyet Anh, Asia Commercial Bank Securities Corp’s Head of Market Analysis.

This is the best news at the moment, as investors are worried about the economy due to bad debts, public debts and increasing fuel prices, noted Phan Dung Khanh, Maybank KimEng Securities Corp’s Head of Market Analysis.

The coming visit by President Obama could have positive effects on the markets, as in the past, particularly in 2006 when the VN Index rose above 650 points, which is also the target for the southern index this year, Dung added.

Low investor confidence sent local market indices down in the last three sessions, amid fears that the US central bank will raise interest rates in June – which would be the second rate hike since December.

The benchmark VN Index on the Ho Chi Minh Stock Exchange  fell 0.7% on May 20 to finish at 614.81 points, extending a three-day decline of 1.6%. Therefore, the southern index was up only 0.7% from the previous week.

The HNX Index on the Hanoi Stock Exchange inched down 0.1% to end at 81.75 points, for a loss of 0.6% during the last three sessions. The northern index added 0.6% during the week.

The rate hike will result in a stronger US dollar against other currencies, including the Vietnamese đong, which will force Vietnam’s central bank to weaken the đong in order to protect local markets, as a stronger dollar may reduce investors’ profits in local assets and investors may withdraw their investments from the country.

Last week, the daily reference mid-point rate set by the central bank for dollar trading in local banks jumped VND41 to VND21,918 on May 20, especially after the US central bank announced that a possible rate hike might occur in June.

Meanwhile, low investor confidence has pulled financial stocks down, including banks and insurance companies, and especially blue chips such as Vietcombank (VCB), Vietinbank (CTG), the Bank for Investment and Development of Vietnam (BID), insurer Bao Viet Holdings (BVH) and BIDV Insurance Corp (BIC).

However, analysts warned investors not to count too heavily on the visit of the US president, as the visit may only have short-term impacts on stocks because market conditions are now different from the past and macroeconomic factors, such as the TPP, will not be finalised in the near future.

Additionally, energy stocks may also affect investor confidence, as they could suffer from a three-day decline in oil prices.

US crude West Texas Intermediate (WTI) on Friday closed last week’s trading at US$47.75 per barrel, extending a three-day fall of 1.2%, and London-traded Brent crude slashed 1.1% in the last three sessions to end at US$48.72 per barrel.

Both local markets traded nearly 178.3 million shares each session, worth VND3.06 trillion (US$136.3 million), which was a slight increase in the trading volume and trading value from the previous week.