Margin Calls, Banker Arrest Rumor Plaguing Vietnam ETF
Shares of the Market Vectors Vietnam ETF (NYSE: VNM) are plunging 7.1 percent Thursday on volume that has already surpassed the daily average amid margin calls in Vietnam and rumors that another Vietnamese banker has run afoul of the law there.
Heading into the start of trading Thursday, VNM was up nearly 21 percent year-to-date, making it one of the best-performing non-leveraged ETFs to start 2013. Likewise, Vietnam's benchmark VN Index has been one of Asia's top-performing indexes this year.
However, the VN Index suffered multiple blows on Thursday as brokers made margin calls on investors that had levered up as Vietnamese shares rose starting in the fourth quarter. Adding to the woes of Vietnamese equities and VNM are reports that another banker has been detained by law enforcement officials.
After the market there closed, state-run VNexpress.net quoted the unidentified banker as denying the detainment, Reuters reported.
Even the banker detainment rumor is just that, a rumor, Thursday's slide in VNM reminds investors of the ETF's sensitivity to such headlines. Due to rising bad debt levels and a government crackdown on corruption that resulted in the arrests of multiple Vietnamese banking scions, VNM crumbled starting in the second quarter of 2012 after starting the year on a strong note.
The ETF had a 42.3 percent allocation to financial services stocks at the end of January, according to Market Vectors data. Prior to today, VNM's significant exposure to bank stocks had served the ETF well in recent months. The development of a debt asset management company to resolve bad bank debt and the government there warming to the idea of increased foreign investment in Vietnamese banks have been positive catalysts for the ETF.
Shares of Baoviet Holdings, VNM's largest holding at over 10 percent of the ETF's weight, and Petrovietnam Finance, another VNM constituent, were each down 6.7 percent in Vietnamese trading. Petrovietnam Construction, another VNM holding, plunged almost 10 percent following a glum profit report, according to Reuters, combing with declines in banking shares to provide a perfect storm of selling pressure on VNM today.
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