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The State Bank of Vietnam's decision to depreciate the dong by another 2 percent accelerated the downward slide of shares on both national stock exchanges on Wednesday, with nearly 80 percent of codes shedding value despite an overnight rise on Wall Street.
The depreciation of the dong from VND18,544 to VND18,932 per US dollar was part of an effort to control the nation's trade deficit, the State Bank said.
In response, the VN-Index lost 1.73 percent to close at 455.49 points, while the value of trades on the HCM City Stock Exchange fell 7 percent to a one-month low of just VND988 billion ($51.2 million). Volume reached just 37 million shares.
Sacombank (STB), the most-active share on a volume of 1.87 million, closed down 1.25 percent, while Vinh Son-Song Hinh Hydropower (VSH) fell by 2.45 percent with 1.68 million traded.
On the HanoiStock Exchange, the HNX-Index declined by 2.62 percent to end the session at 132.62 points. Both volume and value dropped by 10 percent, with only 26 million shares traded, worth a combined VND651 billion ($33.7 million).
PetroVietnam Construction (PVX), the most-active stock nationwide with a volume of 4.86 million shares, declined by 3.8 percent, while Kim Long Securities Co (KLS) dropped by 3.23 percent on a volume of 1.5 million shares. Construction giant Vinaconex (VCG) also plunged by 2.43 percent with 800,000 shares traded.
Pomina Steel (POM) was among few codes to post a gain, hitting its ceiling price for the fourth straight day after announcing its plans to buy back 9 million shares.
Several export companies which stood to benefit from the dong depreciation also posted gains, including Long An Food Processing Export (LAF), Ben Tre Forestry and Seafood Import-Export (FBT) and Sao Vang Rubber (SRC).
PIV Petro Investment and Valuation Co (PIV) saw its first day of trading on Aug. 18, closing up nearly 27 percent from its reference price to VND20,300 ($1.05) per share, with 36,000 shares changing hands.
Both stock exchanges opened in positive territory but exhausted share demand depressed most shares in the latter part of the trading day. More than 460 codes out of a total of 586 on both exchanges lost value.
Foreign investors were most immediately influenced by the currency depreciation, decreasing buys to a net of just VND34 billion ($1.8 million) on both bourses, a decrease of 60 percent from the previous session.
Tran Van Don, head of analysis department for Ha Thanh Securities Co, said the State Bank decision reignited investor worries about inflation.
"Many investors will likely shift investment from risky and low profitable securities to more attractive channels including foreign currency, gold or real estate," Don said.
In addition, a number of investors who had bought shares at depressed prices following last week's slump were active in selling out again on the trading session, contributing to the steep decline, he said.
Analysts of Ho Chi Minh City Securities Co said the higher exchange rate would put pressure on interest rates and the coupon rates of Government bonds.
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