Foreign investors again drawn to Vietnam stock market

VNStockNews.com - The stock market's recent stumble will have the benefit of making another bubble unlikely in the mid- to long-term, and thus may have helped draw back foreign investors, said Andy Ho, director of VinaCapital Investment Management Ltd, addressing the Vietnam Finance and Capital Markets conference held in Hanoi early this week.

Ho also predicted that the pace of equitisation of State-owned enterprises would increase in 2010, generating more quality stocks for the market.

The Vietnamese stock market has been one of the world's fastest growing but also one of the most erratic. The VN Index slipped from a peak of 1,173 points at the beginning of 2007 to a low of 235 points in Febuary of this year, over 600 a couple months ago and back around 500 this week.

Still, the market seemed to have found its bottom and was once again drawing foreign investor interest, said Nguyen Xuan Minh, chair and general director of the Vietnam Asset Management Ltd

"Our fund recently has received inquiries from many investors who want to invest in the Vietnam stock exchange," Minh said.

Louis Nguyen, chair of the Saigon Asset Management, said his company planned to establish a new fund to invest in equitising State-owned enterprises preparing public offerings, pursuant to a new government policy authorising State-owned enterprises to seek and negotiate with private investors prior to going public.

But, Nguyen admitted, Vietnam's stock market was still an emerging market, greatly influenced by investor overreaction to government policies and citing the recent market reaction to new monetary policies issued by the State Bank of Vietnam.

Higher interest rates and the depreciation of the dong would not be impediments to the stock market, agreed Nguyen Ba Thanh, chief of the investment department of SME Securities Co.

By comparison, Thanh noted, "the depreciating greenback supports development of the US stock market since its goods become more competitive."

A series of policy measures have been taken to further attract foreign investment to the nation's stock market, State Securities Commission vice chair Nguyen Doan Hung told the conference.

Up to 49 percent

Foreign investors were now allowed to hold up to a 49-per-cent interest in unlisted public companies (except for financial institutions). They would be allowed to buy up to a full 100 percent interest in securities companies starting in 2012, and no foreign ownership requirements were now being applied to member funds.

Entirely foreign-owned companies were now allowed to transform into joint stock companies and list on stock exchanges, Hung said, and capital gains remitted to home countries were also no longer subject to taxation.

Total capitalisation of the nation's stock market reached $39 billion in November, a figure equal to 55 percent of last year's national GDP and three times higher than last year's level of capitalisation.

There were currently about 10,000 foreign investor accounts on the stock market, over 1,000 of which belonged to institutional investors. They had a combined portfolio value of $7.6 billion, accounting for 20 percent of the market.