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StockmarketFriday, 01/12/2007, 11:38

Fledgling stock market suffers from lack of investor vision

Short-term vision in investments and limited market size are acting to destabilize Vietnam’s rapidly growing but fledgling stock market, experts have said. <br>
Fledgling stock market suffers f

Fledgling stock market suffers from lack of investor vision

 

Short-term vision in investments and limited market size are acting to destabilize Vietnam�s rapidly growing but fledgling stock market, experts have said.

 

Speaking at conference on the 2007 securities market development Wednesday, Tran Bac Ha, general director of Bank for Investment and Development of Vietnam said that the volatile bourse suffered from a lack on vision by domestic investors.

 

He said the bourse plunge late last month for three straight days, with a warning from the Ho Chi Minh Securities Trading Center that the market was overheating.

Numerous inexperienced investors suffered big losses as a result.

 

Sharing the same view Vu Bang, chairman of the State Securities Commission (SSC) pointed out that the heavyweight shares unexpectedly skyrocketed last March and April, plummeted last July, only to head skyward again in the last two months.

 

Bang called it a classic demonstration of unprofessional transactions and inconsistency in the securities market.

 

He also added that an undermanaged unofficial market promised high risk and caused insecurity for the official market and the finance system as well.

 

Nguyen Duy Hung, general director of Saigon Securities Corp., affirmed that a stable stock market should not be heavily dependent on foreign investors.

 

Sessions saw securities prices up when foreign investors increased speculation, and domestic investors would sell en masse upon seeing foreigners doing so.

 

SSC planed to build up an organized investor base, key players in the market to ensure steady performance, Bang said.

 

It would have incentive policies for professional investment institutions to join the market such as banks, investment fund managers and insurance.

 

Particularly, restrictions on participation of foreign investors in the bourse would be eased in tune with the Investment Law and WTO rules.

 

Other experts urged the government to take drastic measures to carry out plans to sell off shares in state firms in 2006-10 and convert foreign-invested firms into shareholder-controlled concerns via share auctions.

 

Bang emphasized that the prolonged public share auctions of state giants would cause ineffective selling state holdings.

 

Targets

The stock market capitalization is set to amount to US$30-40 billion by 2010, accounting for between 30 and 40 percent of the country�s gross domestic product (GDP).

 

This year alone, market capitalization is projected at nearly 30 percent of GDP, currently $60 billion.

 

The Ho Chi Minh City Securities Trading Center is set to become a limited company for the first time and go public by 2010.

 

The Hanoi Securities Trading Center is a limited company owned by the state.

 

The SSC has allowed the two securities trading centers to issue listing licenses.

 

Measures taken

Companies expecting to trade shares in the stock market will have to submit applications to these centers instead of the SSC.

 

The HCMC market is home to 108 listed stocks including two funds, and the Hanoi bourse has 87 corporations trading shares.

 

The two centers� market capitalization totals $15 billion, or 25 percent of the GDP.

 

Vietnam�s monetary market will continue to be stable this year with interest rates under control, and the central bank will maintain its policy to keep inflation below the growth rate, the bank governor said.

 

Governor Le Duc Thuy also forecast at a press conference in Hanoi Wednesday that the range of dollar/dong exchange rate would fluctuate within 1 percent.

 

The international monetary market would leave lesser impacts on local market this year than it did in the last two consecutive years, he added.

 

The central bank, officially known as the State Bank of Vietnam (SBV), forecast that credits would post a growth rate of between 20-21 percent this year and the Vietnamese dong would not be devalued further thanks to a dynamic economy and increasing supply of hard currencies.

 

Based on the forecast, Thuy said SBV would continue to pursue a �careful but flexible� monetary policy in order to keep inflation below the growth rate, a target set forth by the legislative National Assembly.

 

Vietnam, a new member of the World Trade Organization, has allowed foreign banks to establish subsidiary banks in the country, a move that will make the financial-banking market more active.

 

Governor Thuy said the SBV had already received 10 applications for opening branches, representative offices and wholly-foreign owned banks from giant financial-banking groups around the world.

 

Source: VNA

 

 

 


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