Vietnam Equities Slump to Eight-Month Low on Concern About Banks' Capital

Vietnam stocks dropped the most among global benchmark indexes on concern banks will be forced to sell equities to bolster their capital adequacy ratios.

The VN Index fell 3.2 percent to 448.4 on the Ho Chi Minh City Stock Exchange, the lowest since Dec. 18. Vietnam Joint Stock Commercial Bank for Industry & Trade, the nation’s second- biggest listed lender by market value lost 3 percent to a record-low 22,500 dong. Asia Commercial Bank also slid 2.8 percent to 27,800 dong.

A group of lenders wrote to the central bank proposing a delay in the Oct. 1 deadline for increasing capital adequacy ratios on grounds commercial banks were given too little time since the deadline was announced May 25, Thoi Bao Kinh Te Vietnam newspaper reported today. The State Bank of Vietnam ordered financial institutions and banks to increase their capital adequacy ratios to a minimum 9 percent from 8 percent.

The order “excludes investments in other banks or companies from assets when calculating capital adequacy,” said Dao Nho Tam, deputy head of the research and analysis department at Hanoi-based Alpha Securities Joint-Stock Co. “So, banks have been selling shares to meet the ratio requirement.”

The measures, which the central bank said are aimed at ensuring the safety of financial institutions, come as the government prods banks to boost lending and support economic expansion. Vietnam’s top priorities are stabilizing the economy, containing inflation and ensuring “solid” growth, Deputy Prime Minister Nguyen Sinh Hung said on May 20.

“The higher ratio also lowers the money multiplier, further limiting money flow into the market,” Tam said.

Kinh Bac

Kinh Bac City Development Share Holding Corp., a property firm, slid 4.7 percent to 30,200 dong, the lowest since Sep. 28. Southern Rubber Industry Joint-Stock Co., Vietnam’s third- biggest listed rubber producer, plunged 5 percent, the maximum allowed by the exchange, to 30,400 dong.

“The market is heading for the bottom zone,” Nguyen Son, vice general director at Ocean Securities Joint-Stock Co., said in a phone interview today. “Both individual and institutional investors are waiting on the sidelines, and once they see positive signals, they will start buying.”

To contact the reporters on this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net; Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

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