The Market Vectors Vietnam ETF (NYSE:
) is trading lower by 1.3 percent Wednesday after the Ho Chi Minh
City Stock Exchange's VN Index (VNINDEX) plunged 2.7 percent in
the last minute of trading in Wednesday's Asian session in what
some traders viewed as a "mini flash crash."
The last minute tumble for Vietnam's benchmark index
represented a stunning reversal from the action seen earlier in
the session when Vietnamese shares were flirting with gains of
nearly two percent after traders sent stocks to 26-month highs.
Traders bid up Vietnamese shares after Vietnam National Petroleum
announced reduced prices for diesel, gasoline and kerosene,
Reduced fuel prices could be a sign that Vietnamese central
bankers and policymakers are feeling comfortable with the
country's rate of inflation. Ebullience regarding lower fuel
prices was not enough to erase the sting of the late-day
Perhaps the good news is that the late tumble in Vietnamese
stocks was caused by portfolio rebalancing by locally listed
. At least that appears
to be the reason local traders are comfortable
Vietnamese stocks are the second-best performers in Asia this
year, trailing only their Japanese counterparts, but VNM has
wilted in recent weeks. VNM opened 2013 below $19 and proceed to
flirt with $23.60 by mid-February.
Year-to-date, VNM is up nearly 6.3 percent, but over the past
month the ETF is down by roughly the same amount. The ETF's
recent woes can, in large part, be attributed to the government
grappling with a significant amount of bad loans
at Vietnamese banks
Vietnam planned to form a TARP-esque debt asset management
company to absolve Vietnamese banks of scores of sour loans.
However, Prime Minister Nguyen Tan Dung rejected the most recent
plan in late March, saying it did not go far enough. The
proposed Vietnam Asset Management Company was configured to
only deal with banks' bad loans, not their bad debts.
This is significant because VNM devotes 38 percent of its
weight to the financial services sector and several of the ETF's
top-10 holdings are bank stocks. The State Bank of Vietnam had
hoped to have the Vietnam Asset Management Company up and running
by the start of this month, but the central bank has been sent
back to work by Dung, who is demanding a broader-ranging plan to
help shore up the Vietnamese banking system.
Clearly, the bad debt issue is a dark cloud for Vietnamese
banks and, by virtue, VNM. In the event of further declines, VNM
needs to hold support at $19 or risk returning to this year's
For more on Vietnam, click
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