The Ho Chi Minh City Securities Trading Centre marked its fifth anniversary since its first Vietnamese stock market transaction on July 28, 2005. Five years is not a long time but during this period the Vietnamese stock market has experienced many ups and downs.
According to statistics, the number of stocks traded on the market had increased from two stocks with a total value of VND 270 billion in 2000 to 28 stocks with a total value of VND 1,700 billion, not to mention 237 bonds, valued at VND 29,000 billion and a listed certificate of the investment fund. In 2000, the market had only four one-member securities companies and one stock depository organisation. Now, it has 13 securities companies, a securities portfolio management company, three foreign depository organisations and 300 intermediaries. The number of transactions has increased from three times per week to five times per week and the number of auctions has increased from one to two times per day. The Ho Chi Minh City Securities Trading Centre has 23,800 individual accounts for stock trading and 246 accounts of investment organisations with a total value of VND 33,700 billion, or VND 31 billion per working day.
Dr Tran Dac Sinh, director of the Ho Chi Minh City Securities Trading Centre, said that the stock investment environment had improved, building up investorsrsquo; confidence. However, the Vietnamese stock market still saw a slow growth rate. The number of 28 listed enterprises remains too modest in comparison with the number of joint stock companies and the total number of enterprises in Vietnamrsquo;s economy. With few lsquo;goods,rsquo; the local stock market seems to be unattractive to investors. According to the Corporate Finance Department under the Ministry of Finance, Vietnam now has over 500 enterprises, which have a charter capital of over VND 5 billion each and have become profitable in the last two years. These enterprises should be considered to be listed on the stock market. Also, there are over 600 joint stock companies with their charter capital of over VND 5 billion. These enterprises can register for transactions on the stock market. In addition, there are joint stock companies with the State holding a certain stake. However, under Decision 155/2004/QD-TTg dated August 24, 2004 by the Prime Minister, it is unnecessary that the State holds a stake in these enterprises. Furthermore, State-owned enterprises can mobilise thousands of billions of Vietnam dong in capital.
Despite its huge potential, the market has a small number of listed enterprises. Experts say that most joint stock companies have been set up based on the equitisation of State-owned enterprises, so their capital mobilisation demand is not strong. In addition, joint stock companies still use traditional capital mobilisation methods via banks. Additionally, some enterprises have been equitised within themselves listing an inadequate number of shareholders. Some enterprises want to mobilise capital from outside sources but they are reluctant to declare their financial status. Furthermore, the existing regulations do not force equitised enterprises to sell their initially offered shares on the stock market. Another reason is that most joint stock companies are small and medium sized, so they are not attractive enough to investors.
In recent years, transactions on the stock markets have been slow. Bui Nguyen Hoa, chief representative of the Vietnam Securities Commission in Ho Chi Minh City, said the VN Index chart showed that the Vietnamese market was busy when it just started to operate and then slowed down greatly. The market has recently resumed a higher level of business. Individual accounts make up for a large proportion but capital investment amounts on each account remains small. Investors have suffered negative psychological impacts, in particular when the market experiences ups and downs. Among individual accounts, 40 per cent belong to those who work at listed companies. There are few organised and professional investors, investment capital for the stock market, therefore, is unstable. Hoan said that transactions of securities in Vietnam and Asia were similar to a game of securities speculation, instead of investment. The number of transaction accounts equal to five per cent of total number of accounts has proven how slow the stock market is.
Another important reason is that due to poor knowledge of the stock market, enterprises and people are not investing in securities. Instead, they are depositing their unused money at banks or investing in real estate. Yet the Vietnamese people, according to a securities expert, donrsquo;t yet understand that investment in securities would earn them incomes while benefiting enterprises and their country. At the same time, 13 existing securities companies have not provided consultancy services strong enough to attract investors. Many foreign investors want to invest in Vietnamese enterprises via the stock market. For example, many foreign investors bought Vinamilk shares recently. However, the percentage of shares a foreign investor is allowed to hold remains too small for a change in the executive board of local enterprises. As a result, the stock market has not mobilised capital from such a huge source yet.
Despite its limited operations so far, the stock market is still an effective capital mobilisation channel for the Vietnamese economy. Therefore, Mr. Sinh said that the Ho Chi Minh City Securities Trading Centre would develop its strategies throughout 2010 with the upgrading of trading centres, promotion of auctions via trading centres, attraction of more organised investors, and in particular increasing the percentage of shares that foreign investors can hold. The Government is considering allowing foreign investors to hold more than 30 per cent and less than 100 per cent of shares in enterprises, in which the State needs to hold a dominant stake, and up to 100 per cent of shares of enterprises in which it is unnecessary that the State holds a dominant stake.
Song Phuong
Vietnamese
