Vietnam Stocks Fall Most in Asia

Asia Commercial Bank CEO Ly Xuan Hai
Ly Xuan Hai, president and chief executive officer of Asia Commercial Bank. Photographer: Paul Hilton/Bloomberg

Vietnam’s stocks slumped the most in Asia on speculation the detention of a banking tycoon this week will lead to further arrests in the financial industry. 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 Feb. 1. The gauge has fallen 19.5 percent from its high this year on May 8. Bao Viet Holdings, 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 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 Aug. 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 yesterday.

“Markets don’t like uncertainty,” Kevin Snowball, the Ho Chi Minh City-based chief executive of PXP Vietnam Asset Management, which manages about $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 today.

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 today, citing Nguyen Son, head of the regulator’s market development department.

Slumping Valuations

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, today to a four-month high of 6.60 percent, according to data from banks compiled by Bloomberg. A 198 basis-point jump yesterday was the biggest since December 2010.

Fund Injections

State Bank of Vietnam injected 13 trillion dong ($627 million) into the financial system via its open-market operations yesterday, the biggest amount lent for a seven-day period this year. Governor Nguyen Van Binh said Aug. 21 the monetary authority stands ready to ensure banks have adequate cash after Kien’s detention.

Asia Commercial Bank borrowed about 7 trillion dong from the central bank in open-market operations yesterday to “calm” depositors, Deputy CEO Toai said. The lender will withdraw 36 trillion dong of loans from the interbank market as it seeks to ensure its liabilities, Toai said today. 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. The arrest of Kien, who has links to the prime minister, may also be related to an Dung’s ongoing rivalry with President Truong Tan Sang for power within the Communist Party ranks, Steve Norris, a Singapore-based analyst at Control Risks Group, said this week.

Political Rivalry

Dung was reappointed to a five-year term last year. Sang formerly headed the Central Committee’s central economic commission before he was appointed as president last year, one of the country’s top three leadership positions.

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.

— With assistance by Shikhar Balwani, and Nicholas Heath

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