WB Official Warn of Short-term Cash Flow Pouring into Stock Market

Noritaka Akamatsu, a senior financial analyst of the World Bank in Vietnam, has warned at the 2^nd Vietnam Economic Forum, that the government of Vietnam, particularly the State Bank of Vietnam and the State Securities Commission need close cooperation in addressing challenges caused by short-term foreign cash flow for the stock market, Vietnamese state media said.

 

It is not easy to define which short-term and long-term indirect cash inflow is because Vietnam’s stock market lacks transparent information, Noritaka Akamatsu was cited by the Banking Times as saying.

 

Noritaka Akamatsu also said Vietnam’s domestic capital accumulation is low, it must rely on foreign capital inflows, consequently, it doest need institutional investors who will help meet its economy’s long-term demand for capital.

 

The World Bank official also acknowledged achievements recorded by Vietnam in FDI attraction and this year the Asean country expects pledged US$55 billion-US$60 billion FDI, however, the quality of the FDI projects should be improved.

 

The government of Vietnam should improve the management capacity of government agencies to manage risks to stabilize the macroeconomy to keep foreign investors. The slump of the local stock market over the past months this year is not alarming, but because of investor psychology.

 

He also associated the current crisis in the U.S. with the realty bubble in Japan in 1990s, blaming it for securitized properties credits, and collapse of Lehman Brothers is an example. In Vietnam, banks provided loans based on collaterals but not on securitized credit services, the country loosened the monetary policies in 2007, which had created realty and stock bubbles, however, the government had stopped timely by tightening the monetary policies.

 

Meanwhile, Don Hanna, CEO and global economics analyst of Citi said that the crisis in the U.S. will affect cash inflow to Vietnam, which is puzzling investors and turned Vietnam’s stock market, the best player last year, into the worst this year.

 

Vietnam’s macro conditions are improved compared with economies of Asian during the crisis 1997, however, Vietnam should improve transparency and health of the financial market and investors should be informed of macro statistics of the economy, Don Hanna added.

 

Vietnam’s stock market has still lost 48 per cent so far this year. (Banking Times, Investment, HOSE)