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Lacking legal framework for securities consultancy: expert
Dr Nguyen Quang A, Director of the private-run Institute for Development Studies (IDS), said that Vietnam is still lacking a legal framework for securities consultancy services.
Don’t panic when market goes up and down
How do you think the current uncertainties in the stock market will influence the national economy?
In fact, the stock market does not have such a close link to the national economy as people think. We shouldn’t get frightened when the market goes up or down. It is worrying only when the market becomes overly hot.
Among the problems of the stock market, the blunder was that Vietnam once allowed investors to borrow money from banks to buy stocks. The mortgaged assets for the loans were the stocks they were going to buy. A lot of investors accessed bank loans in this way, dreaming of becoming rich overnight.
A big volume of money was poured by commercial banks into the stock market. When the stock prices decrease, investors do not have money to pay bank debts. As a result, banks have to sell the mortgaged shares out on the market to take back capital. The more the stock price decreases, the more shares banks try to sell. As there are more sellers and buyers, the market falls down further.
As the stock market keeps falling down, the state has to take a lot of actions to recover the market. What is your comment about the actions?
As many investors have panicked, the state can take some measures to calm investors down. However, I don’t think that the state must spend money to rescue the market.
The weakest point of Vietnamese people is that they always expect help from the government if they have difficulties. They should be aware that the stock market is like a game, and gamers have to think carefully before making decisions and take responsibility for their decisions.
Lacking legal framework on information management
Do you think that the current mechanism of information management is one of the main reasons behind the current uncertainties?
In fact, the current happenings in Vietnam, I mean investors following the crowd in making investments, once occurred in the US.
Before 2000, in the US, tens of millions of people rushed to purchase shares of dot-com companies, which made the Nasdaq index increase by five times within three years. Investors still hunted for shares of companies which had not made any profit by that time.
The ‘dot-com share bubble’ burst in March 2000; more than 600 dot-com in the US and a lot of other companies in the world collapsed, which made a lot of investors become penniless.
I can say that Vietnam now has all necessary of information channels with information being released from issuance companies, securities companies, State Securities Commission, stock exchange, securities forum. However, the quality of information remains problematic.
The state has to set clear regulations about what kinds of information to release and the responsibilities of the information releasers. It will take a lot of time to do that.
Farmers who have just come to cities cannot become Wall Street investors overnight
As you may know, recently, some groups and institutions that provide securities consultancy services have appeared on the market. However, there is no prestigious institution. Why?
We have to do everything step by step. Farmers who have just come to cities cannot become Wall Street investors overnight. First of all, we need a legal framework for such institutions to be set up and operate. The groups and institutions need to operate and compete with each other, through which people can realise who is the best.
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