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Looking towards a stable and sustainable securities market in 2008
The securities market plays an important role in the national economy. Therefore, managers and policy makers need to adopt effective measures to control and supervise it.
Strong development of Vietnamese securities in 2007
Last year, the total market capitalisation accounted for 43 percent of the country’s GDP, much higher than the target of 35 percent set for 2010. In 2007, the Hanoi Securities Trading Centre (HaSTC) and the HCM City Securities Trading Centre (HoSTC) granted listing licenses to 59 companies, bringing the total number of listed companies to more than 253.
The Vietnamese securities market has proved attractive, through the greater number of foreign investors, in terms of quantity and investment capital. In 2006, there were approximately 2,000 accounts owned by foreign investors. This figure jumped nearly 7,900 in late 2007, posting a three-fold increase over 2006. Meanwhile, the total foreign investment capital on the securities market is estimated to have reached US$7.6 billion, trebling the 2006 level. However, the lump sum through the over- the-counter (OTC) market hit US$20 billion.
In 2007, the securities market saw drastic changes in quantity and quality while the operations of securities, fund management public companies and investors were in place thanks to the introduction of the Law on Securities which came into effect on January 1, 2007.
In addition, bold measures to control the securities market were tightened last year during which, the State Securities Commission (SSC) imposed fines and dealt with 89 organisations and individuals for administrative violations in the securities area. Notably, the number of violations were on the rise in the last few months of last year. Investors said that the SCC should adopt stronger measures aimed at warning and preventing fraudulent acts and mistakes in order to help the market operate in an open and transparent manner, thus ensuring equality for every investor. Furthermore, the SCC should examine and revamp the legal system, particularly for new activities such as providing securities mortgages and transacting unlisted shares at securities companies.
Supervision of securities market reinforced
Regarding control measures for the securities market in 2008, Chairman of the SCC Vu Bang said, “We will take strong measures against (Initial Public Offering) IPO companies who do not register their operations with the SCC, even suspending their issuance or taking back money. In addition, those who are found of guilty of falsifying orders or scrambling orders from customers will be strictly dealt with.
In 2007, the (Price/Earnings ratio) P/E of shares was kept stable at a reasonable level. The rise and fall of the securities market enabled investors to become more mature. Investors who want to get rich quickly without grasping the operations of the market will lose out to those who have a good securities-related knowledge and long-term investment strategies.
However, the subjective factor caused fluctuations in the securities market in 2007 and the early days of 2008 with unreasonable policies in macro-management. This includes the State Bank of Vietnam (SBV)’s instruction on controlling the borrowing rate or issuance time of Initial Public Offering (IPO) stocks of big State-owned enterprises and groups. In addition, there is lack of close co-ordination between the Ministry of Finance (MoF) and the SBV in managing and devising policies, which badly affects the development of the securities market. These weaknesses must be resolved to ensure a reasonable and comprehensive development of the market in 2008.
"Nguyen Thanh Ky", Secretary General of Vietnam Association of Securities Business said that the MoF and the SBV have held a meeting to devise measures to remove obstacles and adjust improper policies. However, government agencies should closely coordinate with each other to devise policies.
Currently, the OTC market for unlisted companies has a lack of openness and transparency. To better manage the OTC market, in the second quarter of 2008 the SSC will implement plans to organise and manage the transactions of unlisted companies. Investors in the OTC market will carry out transactions in the same way as those in the securities market through the HaSTC.
In 2007, the securities market saw the issuances of IPO stocks of big State-owned enterprises and groups and this year many other leading companies and groups will issues IPO stocks. The important thing is how to implement the IPO roadmap to ensure maximum capital for the State. Furthermore, the supply and demand factor must be paid more attention to preventing any negative effects on the securities market. Currently, the Government is considering extending the length of the IPO roadmap. Another important factor to stabilise the securities market is the proportion of shares held by foreign investors in State-owned enterprises.
Regarding this issue, during talks with foreign investors at a recent international conference on foreign trade, Prime Minister Nguyen Tan Dung affirmed that Vietnam welcomed businesses to invest into State-owned enterprises and even commercial banks. The Vietnamese Government stipulated that foreign investors are allowed to buy 49 percent of the shares of joint-stock companies and 30 percent of banks. This regulation aims to ensure sustainable development for Vietnam’s economy as well as benefits for investors.
The scale of the securities market will develop strongly in the next few years with the aim of increasing the capitalisation rate to around 50 percent of GDP in 2008 and 60-70 percent by 2010. To reach this target, it requires practical measures, including improving the management and supervision capacity of State management agencies, the transparency and the management quality of listed companies and the information and technology infrastructure at the HaSTC and the HoSTC as well as completing the legal framework and its procedures.
VOV
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