In this video image released by Vietnam Coast Guard, Vietnamese surveillance ship crew members stand near the side of the ship, allegedly damaged after being rammed by a Chinese ship, in the South China Sea, off Vietnam's coast, Wednesday, May 7, 2014.
Vietnam stocks headed for the biggest retreat since 2001, extending a six-week selloff that turned the benchmark index into the world’s worst performer, amid escalating tensions with China in the East Sea.
The VN Index fell as much as 5.5 percent to 529.40, and was 5.4 percent lower as of 10:56 a.m. local time. Vietnam Dairy Products JSC sank 5.2 percent to the lowest level in almost a year, while Vingroup JSC retreated 3.9 percent. Trading is proceeding normally and officials are monitoring the market, Le Hai Tra, deputy chief executive officer of the Ho Chi Minh City Stock Exchange, said by phone.
The benchmark gauge for Vietnam’s $52 billion equity market has tumbled 13 percent from this year’s peak on March 24 amid growing tension with China over disputed waters and speculation that leveraged traders are liquidating positions. The VN index has wiped out most of the 20 percent advance through its March high that had made the gauge this year’s top performer in Asia.
“The talk is all about the political tension,” Michel Tosto, the head of institutional sales at Viet Capital Securities, said by phone. Some investors are showing signs of “panic” while others are “bottom-fishing” for beaten-down stocks, he said.
Vietnam said this week it’s prepared to take measures over China’s placement of an exploration rig in disputed waters, as the US called the Chinese move “provocative” given recent regional tensions.
The Southeast Asian country’s government said yesterday that Chinese boats intentionally rammed Vietnamese vessels in waters near the Paracel Islands. Armed Philippine police also arrested Chinese fishermen near a disputed shoal close to the Spratly Islands. China responded by accusing both countries of violating its sovereignty over the island chains.
“The political tensions don’t help,” Michael Kokalari, an analyst at CIMB Securities International Ltd., said by phone.
The VN Index’s price-to-earnings ratio fell to 13 today, the lowest level since January, data compiled by Bloomberg show. By comparison, the ratio for Southeast Asia’s benchmark indexes range from 16 in Thailand to 20 in the Philippines and 22 in Indonesia.
Even with the recent slide, the VN Index has advanced 5 percent this year as the central bank cut the benchmark refinancing rate to a six-year low and inflation slowed to less than 5 percent for the first time in more than four years.
The nation’s biggest money manager said two days ago it’s been buying amid the selloff. Equities are “extremely attractive” because valuations are low relative to other markets in Southeast Asia, Andy Ho, chief investment officer at VinaCapital Group, which oversees about $1.6 billion, said in a telephone interview.
“The sea tensions are worrying investors a lot, and prompted many of them to sell,” Hoang Thach Lan, the Ho Chi Minh City-based brokerage unit head at MHB Securities Co., said by phone today. “However, there are also some investors who viewed the tensions as a temporary situation and they took this chance to buy. We see trading volume is very large.”