Vietnam’s Stocks Rise After Valuations Slump to Three-Month Low

Vietnam’s stocks climbed, with the benchmark index rising the most in Asia, as valuations fell to a three-month low and concern of more arrests in the banking industry eased.

The VN Index (VNINDEX) gained 1.7 percent to 392.44 as of 11:19 a.m. in Ho Chi Minh City. Bank for Foreign Trade of Vietnam and PetroVietnam Gas Corp. advanced at least 2 percent. A 21 percent slump through yesterday from this year’s high on May 8 dragged the VN Index’s valuation to 9.4 times estimated profit, the lowest level since May 25, data compiled by Bloomberg show.

The gauge slumped 12 percent from Aug. 20 to yesterday after Nguyen Duc Kien, a founder of Asia Commercial Bank, was detained for what the central bank called conducting “business illegally.” The lender’s former Chief Executive Officer Ly Xuan Hai was subsequently arrested for alleged economic mismanagement, according to a police statement, fueling concerns of instability in the nation’s financial system.

“While the fundamentals of companies essentially haven’t changed, their prices fell 20 percent,” Nguyen Hoai Nam, deputy head of research at Kim Eng Vietnam Securities Co., said by phone from Hanoi. “It’s now a good opportunity to take advantage of such cheap valuations. Foreign investors have been buying, which helped stabilize sentiment.”

Overseas institutions bought more Vietnamese equities than they have sold each day since Aug. 20 except for yesterday, when they divested $1.7 million, according to Ho Chi Minh City exchange data compiled by Bloomberg. Foreigners bought a net $16.4 million of stocks last week, the biggest weekly purchases since the period ended March 30.

Sacombank Denial

Tram Be, deputy chairman of Saigon Thuong Tin Commercial Joint-Stock Bank (STB), or Sacombank, denied rumors that he had been summoned or detained by police, according to an e-mailed statement from the bank today. The stock fell 1 percent to 19,800 dong extending its decline since Aug. 20 to 13 percent.

“The market will likely stabilize in next few days as rumors about more arrests of banking executives turned out to be unfounded,” Pham Ngoc Bich, managing director of institutional sales at Saigon Securities wrote in a note to clients today.

Asia Commercial Bank (ACB) gained 3.2 percent to 19,600 dong in Hanoi trading. The stock had slumped 27 percent since Aug. 20 to yesterday. Moody’s Investors Service lowered the lender’s credit rating to B2 from B1 on Aug. 24 and put the company on review for future downgrades following the “negative developments at the bank,” it said.

Bank Liquidity

Fitch Ratings also placed Asia Commercial Bank on review for a possible downgrade, it said on Aug. 24. The lender’s long- and short-term issuer default ratings may be cut if there’s sustained weakening in the bank’s liquidity and reputation.

State Bank of Vietnam Governor Nguyen Van Binh said Aug. 21 the monetary authority stands ready to ensure banks have adequate cash after the detention of Asia Commercial’s Kien. The central bank injected 13 trillion dong into the financial system through open-market operations on Aug. 22, the most over a seven-day period this year. It added 3.5 trillion dong yesterday.

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.

Vietnam Joint-Stock Commercial Bank for Industry and Trade, the second-largest lender, climbed 3.2 percent to 19,600 dong. The stock slumped 12 percent from Aug. 20 to yesterday.

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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