May 12 (Bloomberg) -- Vietnam’s benchmark stock index plunged to the lowest level in four months while volatility surged to the highest since 2011 amid escalating tensions with China over disputed waters.
The VN Index fell 4.7 percent to 517.05, the lowest close since Jan. 9. PetroVietnam Gas JSC lost 4.4 percent. Vietnam Dairy Products JSC slid 4.6 percent to a 12-month low.
The benchmark gauge for Vietnam’s $52 billion equity market has tumbled 15 percent from this year’s March 24 peak after China moved an exploration rig into disputed waters. Protesters rallied against China’s actions in Ho Chi Minh City and the capital Hanoi over the weekend, while Vietnam’s Prime Minister Nguyen Tan Dung called on members of the Association of Southeast Asian Nations to show support over the issue.
“The prime minister’s call for Asean to get involved and speak up shows the gravity of the situation and the determination of Vietnam to stand up to China, thus increasing the likelihood of conflict escalation,” said Attila Vajda, managing director at Project Asia, an independent research and consulting firm based in Singapore.
The VN Index’s 30-day volatility measure, a gauge of price swings, rose to 30.99 today, the highest level since mid-2011, according to data compiled by Bloomberg.
Vietnam on May 7 said Chinese boats rammed its vessels, fired water cannons and used low-flying aircraft in a confrontation over the oil rig. China the next day accused Vietnamese ships of provoking the clash by crashing into its boats.
The confrontation off Vietnam’s coast is the most serious between the two countries since 2007 when Chinese naval patrol vessels fired on a Vietnamese fishing boat, killing one sailor. In 1988, a Chinese naval attack in the Spratlys, which Vietnam also lays claims to, killed 64 Vietnamese border guards as China seized seven atolls.
Overseas investors took advantage of the biggest weekly retreat in Vietnam’s stock index since August 2012 to boost their holdings in a bet that losses will prove short-lived.
Foreign investors purchased a net $19.88 million of securities on the Ho Chi Minh City Stock Exchange last week, the most in a month, according to data compiled by Bloomberg. The VN Index fell 6.2 percent in the period.
“We continue to believe it’s a good time to accumulate as this panic will not last,” said Michel Tosto, head of institutional sales at Viet Capital Securities.
Even after the recent rout, the VN Index has advanced 2.5 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. The stock gauge’s price-to-earnings ratio fell to 12.5 today, the lowest level since January, data compiled by Bloomberg show.
Credit-default swaps insuring Vietnam government debt against default rose 2.5 basis points to 211 basis points, poised for the highest level in a week, according to pricing from data provider CMA. The Vietnamese dong was little changed.
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