Vietnam's stock market sees robust development

Vietnam's bourse index, VN-Index, on Jan. 23 hit a record high of 1,040.7 points since the local bourse opened in July 2000, indicating the strong development and rosy prospect of the country's fledging stock market.

Since its establishment with the starting index of 100, and only two kinds of listed shares totaling 270 billion Vietnamese dong (VND) (nearly 16.88 million U.S. dollars), Vietnam's stock market has grown in a stable way, especially in terms of listed securities transactions and investment.

By the end of 2006, Vietnam had 193 companies having their shares either listed or registered for transactions at the two local securities trading centers, namely, the Ho Chi Minh City Securities Trading Center and the Hanoi Securities Trading Center, with total value of nearly 221.16 trillion VND (13.82 billion dollars) or 22.7 percent of Vietnam's GDP in 2006, increasing nearly 20 times compared with late 2005, according to Vietnam's State Securities Commission.

Vietnam also housed nearly 400 kinds of government, municipal and bank bonds with a total value of over 70 trillion VND (nearly 4.38 billion dollars) or 7.7 percent of the GDP by the end of 2006.

The country had more than 100,000 stock investors by the end of the year, over trebling that in late 2005 and increasing over 30 times that in 2000. Of the investors, some 1,700 are foreign ones who, including such international investors as JP Morgan, Merrill Lynch and Citygroup, are holding 25-30 percent of shares of listed companies in Vietnam.

By late December 2006, Vietnam had 55 securities companies, 18 fund management firms, and six banks, including two domestic and four foreign ones offering securities deposit services, the commission said, noting that average capital of a securities firm was 77 billion VND (4.81 million dollars).

In a conference held early this month to review the operation of the stock market and discuss measures to boost it, the State Securities Commission predicted that total values of listed shares will represent nearly 30 percent of the country's gross domestic product (GDP) in 2007, and increase to 30-40 billion U.S. dollars, or 30-40 percent of the GDP, in 2010.

By 2010, average capital of securities companies in Vietnam is expected to surge to 500 billion Vietnamese dong (VND) (nearly 31. 3 million dollars), and the number of stock investors to treble or quadruple that now, reaching 250,000-300,000. By the year, foreign investors will be likely to account for 5 percent of the total number of stock investors in the country.

The commission's chairman Vu Bang has told reporters recently that the robust development of the local bourse in recent years, especially early this year is partly attributed to "better performances of enterprises, especially large-scale ones, bigger foreign investment, higher economic growth, and speedier economic reform" in Vietnam. However, such "too hot" development can bring about negative effects to the stock market in the long run, he noted.

To foster the bourse in a strong and sustainable manner, the commission has mapped out four specific measures, including perfecting legal frameworks, institutions and policies; raising quality and quantity of stock demand and supply; restructuring the stock market; and enhancing operation capacity of intermediary organizations.

First of all, Vietnam will issue more guiding documents to better implement its Securities Law, and revise regulations on taxes, fees and foreign exchanges.

Secondly, to facilitate stock supply, the country will, from now to 2010, speed up the process of equitizing state-owned enterprises, especially big companies, corporations and commercial banks; convert more foreign-invested enterprises into joint stock companies so that they will then become listed ones; and strengthen capital mobilization in the form of bonds, especially municipal bonds and investment bonds.

To develop stock demand, Vietnam will focus on fostering institutional investors to ensure the bourse's stability, encourage professional investment institutions, including banks, securities companies, insurers and investment funds to participate in the local bourse, and build and publicize opening-up roadmaps for foreign investors partaking in the market in accordance to the country's Investment Law and its commitments to the World Trade Organization.

And then, regarding the bourse's restructure, Vietnam will change the Ho Chi Minh City Securities Trading Center into the Stock Exchange which is slated for equitization in 2010; turn the Hanoi Securities Trading Center, currently a place for shares in equitized state-owned enterprises and shares held by the state in joint stock companies to be auctioned, and shares of unlisted joint stock firms to be traded under the mode of negotiation, into a market for trading shares of small and medium enterprises; and develop a separate government bond market at the Hanoi Securities Trading Center.

Last, the country will also require intermediary entities like securities companies to raise capital, apply standard corporate governance, intensify application of information technology in stock transactions, link securities, finance, insurance and banking services to gradually form investment banks, and standardize their staff according to international practices.

Source: Xinhua