Vietnam Stock Market: Situations & Solutions for Development

Since becoming operational on March 8, 2005, the Hanoi Securities Trading Centre (HASTC) has held several transactions including auctions for shares of the Postal Equipment Factory (POSTEF) and Vinh Son - Song Hinh Hydropower Plant. With the operation of the two securities trading centres in the country’s two economic hubs (Hanoi and Ho Chi Minh City), Vietnam’s stock market is expected to become an important channel for capital mobilisation for the economy.

Situation and operation results of Ho Chi Minh Securities Trading Centre

Despite not being equipped with modern technologies and machines and lacking staff, the Ho Chi Minh Securities Trading Centre (HSTC) has operated constantly, safely and effectively over the past five years.

HSTC made its 1,000^th transaction on March 21, 2005 after debuting on July 28, 2000. During a seminar on Vietnam’s stock market on May 12, 2005 in Ho Chi Minh City Economic University, HSTC director Tran Dac Sinh said that the centre had opened with only two stocks namely REE and SAM. The figure had rose to 28 by April 15. In addition, there were around 230 bonds and one kind of investment fund certificate listed on the HSTC. In 2000, there were only four securities companies and one foreign securities custody organisation. But now, there are 13 securities companies, one investment fund management company and three foreign securities custody organisations. Also, in 2000, there were only more than 1,000 accounts opened at securities companies for transaction, but the figure has risen up to around 22,600 accounts of individual investors and around 230 accounts of institutional investors.

HSTC saw remarkable development from 2003 despite the economy experiencing a difficult period with an unstable economic growth at that time. There were a relatively large number of bonds and shares listed on the bourse for public transaction. Securities companies, securities custody organisations, finance institutions including banks and insurance companies more deeply participated in the market.

Talking about HSTC-listed companies, Mr. Sinh affirmed that most of the firms have a healthy financial situation. Only some reported profits decreasing in 2004. The birth of the VF1 investment fund certificates in 2004 was also an event marking a new development step of the local stock market.

In the past many technical measures were taken to diversify transaction modes in order to standardise market operations. Apart from that, financial intermediate institutions have intensively diversified services and utilities for investors. Now, 9 out of 13 securities can provide all five common services. Some of them raised their registered capital for better operation.

What solutions are in place for the development of Vietnam’s stock market?

According to economic experts, to reach its target of 10-15 per cent of the country’s gross domestic (GDP)  product total accounted for by the stock market by 2010, the government has to bring out synchronous measures to increase the number of commodities listed on the bourse. In addition, there must be policies to encourage investors’ participation into the market.

Prof. Dr. Nguyen Dang Don and Master Pham Quoc Luyen (from Ho Chi Minh City Economic University) said that Vietnam should build Securities Law and complete legal documents on taxes, fees, accounting and an auditing system and forex management policies soon to encourage investors to actively join in the market. Market regulation bodies and other market members such as listed firms, securities companies and investment funds should also be developed to boost the market. Besides, the establishment of an OCT market is also needed for firms that are not ineligible to list on HSTC can offer their shares to investors. Developing securities transaction networks and diversifying order-accepting modes (to help investors participate in the market anywhere, anytime and at low costs) are also urgent measures to bolster the stock market’s development. Enhancing development of securities investment funds is an effective way to stabilise the local stock market. Issuance of government bonds and corporate bonds should be encouraged. Particularly, all eligible companies should be helped to easily list on the stock market. Currently, there are more than 1,200 privatised companies and more than 1,000 joint stock firms which have been set up and operateunder Business Law. Around 400 firms are now eligible for listing on the HSTC, but presently there are only 28 firms floating their shares on the bourse.

In addition, the market regulators should upgrade and modernise transaction systems of the HSTC in order to have more order-matching times per day (2 times/day at present). This will help improve liquidity for all securities.

According to HSTC director Tran Dac Sinh, from now to 2007 an independent Securities Custody Centre will be built in line with the upgrade of the HSTC, which will then become a Vietnamese stock exchange.

The state should intensify promotion of operation of the stock market to the public via the mass media, schools and universities. Moreover, it should create favourable conditions for both local and foreign institutions and individuals to participate in the stock market. 

• Cong Ly