Forex fears put end to market rally

The benchmark VN Index on the HCM Stock Exchange lost 1.6 per cent to close at 565.2 points and the HNX Index on the Ha Noi Stock Exchange was down 0.7 per cent to end at 79.6 points.

Large-cap companies such as Vinamilk, Vietcombank, the Bank for Investment and Development of Viet Nam (BIDV), Masan Group and FPT Corporation led the market decline amid fears that the changes in exchange rate between Vietnamese dong and the US dollar will hurt their profitability.

Firstly, analysts expect the US dollar will strengthen against the dong as the US central bank is set to consider an interest rate hike at its meeting next week.

A stronger dollar may force Viet Nam's central bank to devalue the dong in order to keep Vietnamese exports competitive in the international market. The bank currently allows the dong to trade in a range known as a trading band. In recent days, the dong has traded around 22,500 per dollar, near the band's upper limit.

Investors are also eyeing a slump in the Chinese yuan, which hit a four-year low yesterday due to a slowdown in the world's second largest economy with lower exports in November and a slower economic growth rate during the July-September period.

The unpredictable future of the Chinese yuan and the US dollar will make it harder for Viet Nam to consider its monetary policy next year to ensure the competitiveness of Vietnamese exports against Chinese products, Bao Viet Securities Corporation (BVSC) wrote in its report.

"The current slowdown in China's economy made the yuan hit a four-year low, however, it may get stronger in comparison with the US dollar in middle term as it has been added into the basket of reserve currencies by the International Monetary Fund (IMF)," Bao Viet said.

At the end of yesterday, Vietcombank (VCB) lost 3.9 per cent, Vinamilk (VNM) fell 1.6 per cent, BIDV (BID) dropped 1.9 per cent, Masan Group (MSN) was down 0.7 per cent and FPT Corporation (FPT) declined by 1.6 per cent.

Both local bourses traded more than 146 million shares worth VND2.27 trillion (US$101 million), a decrease of nearly 10 per cent from Tuesday's trading value.