Sunday, December 11, 2011

Today's Major Market Move: HNX Equity Index in Vietnam declines 45% in 2011

That paragon of capitalism, Vietnam, has not one main stock market, but two. One is located in Ho Chi Minh City (the eponymous Ho Chi Min Stock Index, the larger of the two) and the other is in Hanoi City (the HNX Index). The HNX Index has the distinction of being the 5th worst performing global equity index in 2011 (of the indexes that we track). Here's the bottom 10:

It is worth noting that the Ho Chi Minh Index is down only half of that (-22.8% vs -45.9%). I was unsuccessful in my research to find information to account for the significant difference in the amount of the declines. Part of the reason for the overall negative direction of both indexes appears to be both fiscal and monetary mismanagement by government authorities. From a monetary perspective, inflation (around 13%) and interest rates are high making it difficult for business to expand. General fiscal management is negative but there are some bright spots. Debt to GDP is still a manageable 52% but they've run a budget deficit 10 out of 12 years going back to 1998. The deficit spiked to 7.7% in 2010 although they were able to bring that down to a more manageable, but still relatively high, 3% in 2011.

In terms of growth, there are high expectations being placed on the Vietnamese economy with the IMF projecting GDP to grow by over 60% for the time range 2010-2015. Vietnam would only be behind Cambodia in terms of expected GDP growth in Southeast Asia. Here's a comparison of countries in the region:

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