Vietnam stocks posted their 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.
The VN Index plunged 5.9 percent to close at 527.09, the steepest drop among 93 global indexes tracked by Bloomberg. Vietnam Dairy Products JSC sank 6.7 percent for a record one-day loss, while Vingroup JSC retreated 3.1 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 in Ho Chi Minh City, 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 U.S. 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.
“This row between China and Vietnam has put cold water on the market,” Marc Djandji, a partner at Asean Strategy Group, said by phone. “This is a serious thing. It’s not something that is resolved in a day. People are hoping for some sort of way to resolve this internationally.”
Vietnam and China fought a border war in 1979 that resulted in a rupture that lasted until relations were fully normalized in 1991. Vietnamese history over the last two millennia has been characterized by Chinese incursions into what is now Vietnam’s territory, and the names of streets in cities are regularly named after heroes from those conflicts, such as Ngo Quyen, Nguyen Trai and Le Loi.
Even with the recent slide, the VN Index has advanced 4.5 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.
Today’s stock plunge is “overblown” because “valuations are not bubble levels and monetary indicators are stabilizing,” said Alan Richardson, whose Samsung Asean Equity Fund outperformed 96 percent of peers tracked by Bloomberg during the past five years. His fund is “comfortably buying” Vietnamese stocks now, Richardson said.
The VN Index’s price-to-earnings ratio fell to 12.7 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 23 in Indonesia.
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.”
— With assistance by John Boudreau, and Nguyen Dieu Tu Uyen