A fix requires more than hot air
The Government needs to take specific action to reheat the tepid stock market with regulations that address both the shortage of capital and the overabundance of shares, said a number of participants in a conference held yesterday in Ha Noi.
Viet Nam Association for Securities Businesses general secretary Nguyen Thanh Ky said that the State Securities Commission has been discussing possible solutions with various stakeholders and associations since the beginning of the year.
"Many ideas have been raised and discussed repeatedly in various meetings. But, as of yet, none of them has become reality, with the result that the market has been in a continuous slump since the beginning of the year," Ky said.
"They haven’t issued any regulations to effect any of the proposals, but just raise the possibility by saying it over and over again in an effort to console the market for a day," he added.
Thang Long Securities Co director, Le Dinh Ngoc agreed.
"We are here again talking about delaying implementation of the capital gains tax on securities, or whether to lift the commercial bank lending cap for securities investors, and so on, all of which we consider as good measures to aid the market in the long term," Ngoc said. "But investors keep wondering when and how any of this will happen?"
Ngoc also said that it was time the Government should make one of the discussed solutions a reality in order to blow some fresh air into the stock market.
He urged regulators to take direct aim at Directive No 03, which contains the three-per-cent cap on commercial bank lending against securities collateral.
"What we have seen consistently since Directive No 3 is a downtrend on the stock market and a heating up of the real estate market which seems to be absorb a huge amount of capital from the stock exchange," Ngoc said. "But policymakers are still all talk and no action."
State Securities Commission vice chairperson Nguyen Lien Hoa pledged that the commission would soon respond to calls for action. The VN-Index yesterday plummeted another 26.14 points, or 3.13 per cent, to close at 807.74 points.
To IPO or not to IPO
Conference participants also discussed the delay in a number of high-profile IPOs by equitising State-owned enterprises.
Nguyen Thi Mui, deputy director of the Finance Institute, said delaying the IPOs was not necessarily a good thing.
"Ups and downs on the market are a normal occurrence," she said. "So, you can talk about delaying new auctions as a measure to reduce the overload of shares on the market. But if you talk about it every time the market is down, the State’s equitisation plans will be finished."
Delays will do nothing to ensure stable development of the market, she argued. Instead, she said, they are simply delays to the development of the market.
"The enterprises that intend to list this year are well-known, have good business results and prospects for growth," agreed Ngoc. "If shares of these enterprises are put on the market, they would attract flows of capital to the stock market, including large amounts of overseas capital."
To redirect capital flows, the Government should also consider a policy to control the growth, and flow of money into the real estate market, said Viet Nam Association for Finance Investors general secretary Nguyen Hoang Hai.
"Currently, there are no detailed regulations for reducing the heat in the property market," Hai said, suggesting that unregulated growth in the real estate sector posed even greater risks to investors than the securities market.
Ky noted that the cap on commercial bank lending against securities collateral was encouraging capital flows towards real estate, throwing fuel on the fire.
"We need a policy to subdue overheated growing of the property market, as well to direct more capital toward the stock exchange," Ky said.
VNS
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