Foreign indirect investment capital (FII) into the Vietnam stock market will likely hit US$5.5 billion by end-2007, said Nguyen Ngoc Bao, head of the Monetary Policy Department under the State Bank of Vietnam.
At the Seminar on Stock Market and its Impacts on Financial Markets, opened Wednesday in Hanoi, Bao said FII capital invested into local securities has reached about $4 billion.
“The figure is expected to increase by $1.5 billion, bringing the total to $5.5 billion in next six months,” he said. “At this investment level, foreign investors are holding between 20 per cent and 25 per cent of total listed market capitalization.”
Active participation of foreign investors in the stock market recently created a strong indirect investment inflow and changed investment portfolios in Vietnam, the SBV official said.
Opening the stock market will help regulate foreign investor control, which results in risks to the financial system, Bao said.
Vietnam’s currency has been under pressure for hikes since November 2006, due to the sharp increase of FII inflows, he said, adding this would lower exports and increase imports in the medium and long term.
During the seminar, experts agreed on measures to develop the market in sustainable ways.
First, Vietnam will continue to restructure and equitize state-owned enterprises to create high-quality commodities for the stock market; develop intermediate institutional systems and supportive organizations to improve capability of entities in the market.
The stock market will be developing under a modern structure, with the state control and connection with the regional capital market.
Vietnam will complete legal frameworks and suitable regulations in Vietnam, in line with the country’s international commitments.
Finally, Vietnam will make information from listed institutions more transparent, to protect investor rights, and improve the infrastructure of securities trading centers to meet demand for developing the stock market.
By end-2006, Vietnam’s total stock market capitalization recorded $13.8 billion, accounting for 22.7 per cent of the country’s GDP, said the State Bank. The figure reached $24.4 billion at the end of the first quarter 2007, making up 40 per cent of GDP.
However, the stock market is still not seen as a clinical thermometer of Vietnam’s economy and mobilizing capital channel for local companies.
To date, 193 companies have listed on organized bourses in Vietnam, and more than 120,000 trading accounts opened.
State Securities Commission statistics showed that by end-March, the average price over earnings, or PE ratio, in the Ho Chi Minh City exchange was 28.4, and the average ratio in the Hanoi bourse was 45.1. (Liberated Saigon, Vietnam Economic Times, VNA)
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