Vietnam's stocks slumped the most in Asia after the detention of a banking tycoon this week. The benchmark money-market rate climbed to a four-month high.
The VN-Index closed 4.2 percent lower at 392.82 in Ho Chi Minh City, the lowest level since February 1. The gauge has fallen 19.5 percent from its high this year on May 8. Bao Viet Holdings (BVH), the nation's biggest publicly traded insurer, dropped by the Ho Chi Minh City bourse's 5 percent daily limit. Hanoi-listed Asia Commercial Bank (ACB) plunged 6.7 percent.
The VN-Index slumped 10 percent the past three days. Nguyen Duc Kien, who helped found Asia Commercial, was arrested on August 20 after he allegedly "conducted business illegally," according to a central bank statement. The Supreme People's Procuracy of Vietnam approved an arrest warrant for Ly Xuan Hai, Asia Commercial's chief executive officer, online newswire Petrotimes reported Wednesday.
"Markets don't like uncertainty," Kevin Snowball, the Ho Chi Minh City-based chief executive of PXP Vietnam Asset Management, which manages about US$100 million, said by phone. "Until such time we get clarity or hear exactly what's going on and why these arrests are being made, there's a good chance the markets would continue to be weak."
Asia Commercial's Hai was not reachable on his mobile phone. The company has not received any official information on the matter, Deputy CEO Nguyen Thanh Toai said by phone Wednesday.
More than half the VN-Index's 303 companies fell by at least 4 percent. Vietnam's State Securities Commission urged investors to be calm after Kien's arrest, the Thoi Bao Kinh Te Vietnam newspaper reported Thursday, citing Nguyen Son, head of the regulator's market development department.
The VN-Index's tumble this week dragged valuations to 9.5 times estimated profit, the lowest level since May 25, according to data compiled by Bloomberg. That's 8.7 percent lower than the MSCI Emerging Markets Index's 10.4 multiple.
"The Vietnam issue is more about confidence than market valuations," said Gavin Parry, managing director of Hong Kong-based Parry International Trading Ltd. "The high probability of more high-profile banking arrests is creating uncertainty for the banking system. The central bank has stepped in to assure it will cover its liabilities."
The nation's benchmark money-market rate has more than trebled in the past week on concern banks will hoard cash to meet customer withdrawals. The overnight interbank deposit rate surged 94 basis points, or 0.94 percentage point, Thursday to a four-month high of 6.60 percent, according to data from banks compiled by Bloomberg. A 198 basis-point jump Wednesday was the biggest since December 2010.
State Bank of Vietnam injected VND13 trillion ($627 million) into the financial system via its open-market operations Wednesday, the biggest amount lent for a seven-day period this year. Governor Nguyen Van Binh said August 21 the monetary authority stands ready to ensure banks have adequate cash after Kien's detention.
Asia Commercial Bank borrowed about VND7 trillion from the central bank in open-market operations Wednesday to "calm" depositors, Deputy CEO Toai said. The lender will withdraw VND36 trillion of loans from the interbank market as it seeks to ensure its liabilities, Toai said Thursday. The stock plunged 19 percent the past three days.
Prime Minister Nguyen Tan Dung's government is seeking to shore up a banking system saddled with the highest bad debt in Southeast Asia that credit-rating companies cite as a threat to the economy.
Kien held a senior position managing Vietnam's professional soccer league and his family was among the 30 wealthiest in the country last year, according to VnExpress.
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