HCM City Securities Trading Centre’s VN-Index closed above the 1,000 point threshold for the first time yesterday, on the back of upbeat financial and news reports, though overall market risks remain

VN-Index hits record high on upbeat financial news

HCM City Securities Trading Centre's VN-Index closed above the 1,000 point threshold for the first time yesterday, on the back of upbeat financial and news reports, though overall market risks remain.

The index ended the week at 1,023.05 points, up 4.06 per cent for the day, despite thin trading volume. Only 9.72 million shares and bond certificates exchanged hands, down 36 per cent compared to Thursday's session. Trading value was just above VND1 trillion (US$62.5 million).

Blue chips led the change with Vinamilk rising 4.86 per cent to VND194,000 a share, while telecommunication firm FPT ended at VND578,000, up 4.9 per cent.

Buying was sparked earlier in the week after international financial magazine Motley Fool ranked Vietnamese stocks third in profit making. Local papers also reported that foreign fund managers continue to be upbeat on the local securities market this year.

Prudential Balanced Fund certificates were the most heavily traded shares yesterday with volume at 860,250. It closed at VND13,100.

The market was also helped by the release of positive 2006 financial reports. FPT on Thursday announced VND535 billion in (unaudited) annual profits, up 77.5 per cent compared to 2005.

Sai Gon Thuong Tin Commercial Bank (Sacombank) reported VND544 billion in pre-tax profits, up 78 per cent year-on-year, and plans to issue a 12 per cent dividend payment.

Song Da Urban and Industrial Zone Investment and Development (SJS) last week issued a three-to-one stock split by issuing new shares to existing shareholders. The stock price fell from VND728,000 to VND190,000 after the split.

Since then, SJS has quickly gained ground, rising 20 per cent in the last five sessions to end Friday at VND228,000.

Insider trading hurts

Earlier this week, the Viet Nam Association of Financial Investors (VAFI), in a letter to the Ministry of Finance, urged for better transparency in the securities market to minimise insider trading.

Nguyen Hoang Hai, the association's general secretary, expressed concern that the present market monitoring mechanism leaves a lot of room for insider trading. VAFI has cited several occasions when heavy activity in a particular stock preceded the announcement of material information.

According to current regulations, listed companies must disclose information and data to the securities trading centres, which is then responsible for publicly releasing it. The problem is that it could take as long as four or five days to pass through market regulators.

VAFI has proposed that listed companies send information simultaneously to the centre and the media, a common practice in other Asian and Western markets.

In statements to on-line publications, Tran Van Dung, director of the Ha Noi Securities Trading Centre, says the proposal is not feasible. The centre, as a market moderator, needs to screen data and sometimes suspend trading ahead of sensitive information being released.

Dung, however, admits stricter controls should be enforced in information management to prevent leaks.

Hoang Hai adds that the finance ministry should not only strengthen transparency but should also encourage the two securities trading centres to behave more like joint stock companies.

"If the centres operate under the joint stock company model, their directors would then have to take full responsibility for their operations, profits and performance," he says.

The centres are managed and supervised by the State Securities Commission as dependent administrative bodies.

"Stiffer penalties are essential to minimise such practices [of insider trading]," says To Hai, director of Bao Viet Securities - HCM City branch.

Insider trading puts smaller investors at a huge disadvantage since they are usually not privy to the same information as their larger, well-connected counterparts.

"Those who receive insider information can easily order shares prior to an official announcement," Hoang Hai says. "They can easily turn a quick profit," while reducing their risk exposure to almost nothing