The money is back

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The first signs have appeared of money coming back to the stock market, and many analysts are now upbeat about short-term prospects.

Several investors told Thanh Nien they have withdrawn savings from banks and are considering other investment vehicles like the stock market.

The change of mind came after the central bank tightened control over interest rates, strictly banning banks from breaking the deposit ceiling of 14 percent.

The monetary authority already took the first step to show that it's serious this time. Last week, partly private lender DongA Bank was banned from opening new branches for a year after the central bank found one of its branches breaching the rate cap.

"The State Bank of Vietnam showed some aggressive actions to keep the interest rate ceiling at 14 percent," Hanoi-based Thang Long Securities said in a note on Monday. "This information is likely to play a major role in supporting the market in the coming time," it said.

However, profit making pressures at some hot tickers would likely be an obstacle to market increases, Thang Long said. "Therefore, the market would likely show a sideways trend while no critical macroeconomic figures have been released." 

It also noted that there are expectations for a lower consumer price index in September. Inflation accelerated to 23 percent in August, driven by food prices. But on a month on month basis, inflation subsided slightly in August, rising by 0.93 percent compared to 1.17 percent the previous month. 

Borrowing costs have also gradually fallen since early this month.

Nguyen Van Le, CEO of Saigon Hanoi Bank, said businesses have been struggling with lending rates of more than 20 percent for months, but loans are more affordable now.

Although lending rates of 17 or 18 percent per year are not ideal for businesses in the long run, at least the rates are acceptable for short-term loans, Le said.

He added that the current maximum deposit rate of 14 percent is also reasonable considering that inflation is expected to ease to single-digit levels next year.

Economist Dinh The Hien told Thanh Nien that the stock market had been shaken for months by high inflation and interest rates. So as consumer prices start to ease and interest rates are lowered, the market is beginning to pick up, he said.

Most importantly, local investors are hoping for better economic prospects and want to buy shares to prepare for a rebound later, Hien said.

"However, I think the recent increases don't have a foundation strong enough to lead to a stable bullish state for the market," he said. "Capital resources have not been really drawn into the market yet. Besides, foreign investors are still cautious about Vietnam's macroeconomic conditions and are not willing to invest much money."

Brokerages said local investors dominate the market these days, accounting for around 80 percent of all trading activities.

Do Linh Phuong, deputy general director of VietinBank Securities, said some capital flows are moving from the monetary market to the stock market, but many investors, both individual and institutional, are yet to open their pockets.

When there is still instability in the economy, there is high risk for stock investors, Phuong said.

The market, therefore, is unlikely to see a strong rebound to 2009 levels, he said, also noting that short-term increases can be expected.

FPT Securities agreed that as concerns over the economy remain, a full recovery for the stock market is uncertain at this point.

However, the company said, capital inflows into the market have grown stronger, especially into stocks of securities firms and mineral sectors. So there is a chance that the market can finally end the losing streak which has lasted for nearly two years, it said.

Analysts at ACB Securities are less optimistic. They pointed out in a note Monday that the market actually had a bearish week in the week ended September 16, the first since the middle of August, with the benchmark VN-Index losing 0.61 percent.

The decline, though small, came amid worries that inflation may accelerate during the last few months of the year, ACB Securities said.

"Currently, Electricity of Vietnam still wants to raise power prices; if that happens, it will significantly impact inflation until the end of the year," it said.

Furthermore, as world oil prices are sharply increasing, accompanied by a recovery in world investor confidence, the government may adjust the gasoline price back to previous levels, it added.

Vietnam reduced the price of oil products by 2.3 percent in late August. The Ministry of Finance last week turned down a proposal by fuel distributors to raise retail petroleum prices. It was unclear for how long the ministry wanted to keep the prices unchanged.

The power price hike proposal, on the other hand, has been given the green light by the government.

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