More Goods Expected for Stock Market

More Goods Expected for Stock Market

The Government's Resolution N⁰ 01/2005/NQ-CP issued early this year provides guidelines for major enterprises to list on the stock market when they are equitised. Accordingly, the Ministry of Finance will be responsible for guiding and supervising the observation of the resolution. This means that the Government has allowed the Ministry of Finance to combine the equitisation process with the listing on the stock market. This was controversial during the draft of Decree N⁰ 187 on the equitisation of State-owned enterprises.

According to many experts, in 2005, the Vietnamese stock market will see basic changes. This is because insurance companies, including Prudential, Manulife and Bao Viet, as well as many other major investment organisations are planning to invest thousands of billions of Vietnam dong in the local securities market via investment funds. Apart from the Vietnam Securities Investment Fund Management Company, the Thanh Viet Fund Management Company, the Vietnam State Securities Commission has recently granted licences to the Prudential and Manulife fund management companies. This has opened a new opportunity for the stock market to attract more goods from investment organisations.

The problem is how the potential investment need will be met. According to experts from the Vietnam State Securities Commission, while seeking solutions for the development of the local stock market, the State Securities Commission has proposed a combination between equitisation of major State-owned enterprises with the listing on the stock market. This is considered as a solution to increase the market supply. Yet, the proposal has not been accepted by the Ministry of Finance. There are many reasons that the Ministry of Finance would prefer that enterprises are forced to be listed. Therefore, while developing the State Securities Commission’s Plan of Action for the development of the stock market, the Commission has set a task of co-operating with the Department of Corporate Finance to provide guidelines for State-owned corporations, major and effective enterprises, including commercial banks, to combine their equitisation with the listing on the stock market as part of efforts to increase high quality goods for the market. This means that what the State Securities Commission is expected to do for promoting goods for the market will be to encourage and call for enterprises to join the stock market.

Therefore, the generation of goods for the stock market has an opportunity as the Government has guided major State-owned enterprises to be listed on the stock market when they are equitised. Nonetheless, the concretisation of the guidelines will need a lot of time.

The promotion of goods for the stock market to meet the potential demand will certainly stimulate the market to make a breakthrough. However, the problem is how enterprises will be chosen to attract more capital.

The fact shows that enterprises’ scale is important. But more importantly, their profitability in the future will decide the price of stocks. According to economic experts, managers must pay careful attention to this issue when making decisions. Only when the stock market can attract the most effective enterprises, will it be able to convince investors to pour in their capital, thus helping attract private investors. While enterprises are discreet with the stock market, a strong measure, forcing enterprises to be listed, is necessary not only for the stock market but also for enterprises to make a breakthrough when their international economic integration is coming closer.

• Mai Anh