A sharp plunge in Vietnam's stock market over the past two weeks is primarily due to investors taking profits after a massive rally and the correction will therefore be short-lived, analysts said. The Vietnam index's near 15 percent plunge from record highs hit on April 10 has come against the backdrop of a retreat in many emerging markets, driven by the rising fear of global trade protectionism and a rise in US bond yields. The VN-Index was Asia's best performer in 2017, with gains of 48 percent and, despite suffering losses of nearly 4 percent each day on multiple occasions this week, is still up nearly 7 percent this year.
"Vietnam's stock market has been falling over the recent sessions mostly because investors are taking profits," said Tran Anh Tuan, chief analyst at Vietcombank Securities.
The index, with a market capitalisation of $140 billion, was trading around 1,037 points on Friday. Besides impressive economic growth and the promise of foreign investment flows, the market has been propped up by a boom in equity issues and the initial public offerings (IPOs) as the Southeast Asian country speeds up a privatisation drive. A recent one is Vietnam Technological and Commercial Joint Stock Bank, which is set to be the country's biggest-ever IPO and raise roughly $922 million.
John Yoon Young Joong, an analyst at Viet Dragon Securities Corp., said it also was possible that investors were reducing positions ahead of possible new rules that may cut the margin lending for leveraged trades. "It seems that the market has gotten ahead of itself and rationalism is coming back to the market, which is good," Yoon said.
Banks have been among the biggest losers since the April peak, with shares of Military Commercial Joint Stock Bank down 18.5 percent and Bank for Foreign Trade of Vietnam down 20.1 percent.
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