Thomson Financial: Vietnam will cut the daily trading band for stocks to 1 percent from 5 percent from Thursday in a bid to halt the freefall of share prices on its fledgling bourse, officials said. The announcement helped the main Ho Chi Minh Stock Exchange (HOSE) recover somewhat Wednesday. The benchmark VN Index rose 8.03 points or 1.6 percent to close at 504.67, a day after it plunged below the 500-point mark.The State Securities Commission announced the new intra-day trading band for the HOSE on its website. It also cut the trading band at the smaller Hanoi Securities Trading Center from 10 percent to 2 percent per day.
To fight inflation, Vietnam's communist government has in recent months raised interest rates and banks' reserve requirements and taken other steps to reduce credit growth and the money supply. But the measures have led to a liquidity crunch that has accelerated the trend of investors fleeing the small stock market.
The HOSE's main index hit its peak of 1,170 points in March 2007, but has become Asia's worst-performing bourse this year as many domestic investors have switched to gold and real estate amid a property boom.
Deputy Prime Minister Nguyen Sinh Hung, trying to calm investors, has said repeatedly that the stock market has 'already reached the bottom.'
At the smaller Hanoi bourse, the main index rose 8.74 points or 5.25 percent to close at 175.31 on Wednesday
My Take: Signs of desperation in Vietnam's investing community. The measure taken by the Vietnamese authorities is very drastic and bold (and shocking to the investing communities as rules were broken to suit a situation). I cannot imagine coming to work on a "bad market day" and see only sellers on the trading screen without any buyers because all the stocks have hit the limit down prices since the trading band for the stocks is a lowly 1-2%.. It is like prolonging a dying process ....."die slowly".
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