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Gold uncertain, pessimism on stocks unwarranted   2009-11-23 - Thanh Nien

Soaring gold prices this month have prompted investors to switch to currently cheap stocks until things return to normal but analysts say only those with experience should dabble in a market riding on investor pessimism. 

In the gold market, short-term investors have more chances to make profit as long as they accept the risks involved, said Lam Minh Chanh, general director of Vang The Gioi (World Gold) Finance Joint Stock Co. (VTG).

Long-term gold investors should stay out of the game as “it’s not simply that you sell at a high price and you earn a profit. The price can climb further or plunge steeply,” Chanh was quoted by Dau Tu Chung Khoan last Friday.

These investors should wait until the yellow metal sets a new price, at which it stays stable for a while, he said. “No one can tell if the current gold price is already the new high.”

In Vietnam, gold went from US$950 per ounce to nearly $1,000 in early September, past $1,100 in early October and hit a record high of $1,620 last Wednesday. Global gold prices last week rose 5.3 percent, the strongest growth since April, after India announced it would buy 200 tons of gold from the International Monetary Fund.A recent survey by Bloomberg showed that 17 of 23 respondents – investors and analysts – said the precious metal will rise further this week. Some analysts were quoted by the wire service as saying it could surge to $1,300 per ounce in the next six months.

While waiting for the gold market to stabilize, investors that already hold some shares can bring more money to the stock market, which is now struggling at around 550, and help it return to the psychologically important 600 mark, Chanh said.

Vang The Gioi Co. based in Ho Chi Minh City is going to launch a product allowing investors to mobilize one investment for both markets.

Chanh, a player on both exchanges, said Vietnam’s stock market remained young as “investors still tend to be either over-greedy or over-insecure.” Yet the market has started to mature as liquidity recovered more quickly during steep declines this month, when the benchmark VNIndex tumbled 3.75 percent last Monday and a further 1.8 percent the day later, he said.

Still, Giang Trung Kien, Hanoi-based head of investment analysis at FPT Securities Inc. (FPTS), said “Liquidity in the stock market has declined lately because investors have been trading very cautiously.”

Trading on the southern bourse hit a year record high on October 23 when around 137 million shares changed hands but then slid to about 42 million on November 11, the lowest in a month, and has been hovering around there since, according to figures on the Ho Chi Minh Exchange website.

As of Wednesday, the trading value at both southern and northern markets together stayed for the eighth straight day below VND3 trillion ($168 million), less than half of the record high last month, as investors were wary of a dearth of news and happy with small purchases.

The market lacks steam to make a rally, analysts say.

“Most investors are keeping a very close watch on the National Assembly meeting where delegates are discussing the credit institutions law. Some people are concerned that the government may tighten lending for stock investment,” Kien told Bloomberg in a telephone interview from Hanoi Tuesday.

“The market will probably fluctuate around the current level from now to the end of this month.”

However, he forecast the index may climb back to 600 points in December because of the positive earnings prospects of listed companies in some sectors such as banking, finance, real estate, and commodities in the fourth quarter. “Those companies will support the market.”

Le Van Minh, director in the HCMC branch at Agribank Securities told Bloomberg on Wednesday that investors are worried “whether the government is going to tighten monetary policy or tighten lending for stock investments.”

Yet he believed in “positive” prospects for the stock market as investors’ sentiment gradually becomes more stable.

But Chanh also said stock investors mostly rely on the advice of stock firms and analysts in the field, he said.

Investors are creating risks for themselves in being too nervous about rumors, said Huu Nghia, a stock investor in HCMC.

They are making decisions based on “groundless rumors resulting from stock firms’ comments on government policies,” Nghia said.

He said most small investors are “swung” easily and around 80 percent of stock investors in Vietnam can lose 30-50 percent during a session as they tend to “sell or buy by any means.”

Le Ba Hoang Quang from Sacombank Securities Co. told a conference on the stock market last weekend in HCMC that Vietnam’s economy had highly improved from 2008.

“Maybe the investors are worried about the tsunami sweeping everything so they’re ready to run away. However, based on the current economic situation, that tsunami can only occur in their imagination and the first ones to suffer from its damage are anxious investors.”

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