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Foreign capital continuing to flow into Vietnam’s stock market
The State Securities Commission (SSC) has announced that the balances of foreign investors’ accounts remain high, and that the moves by several banks of converting VND to foreign currencies are for purposes other than securities-related transactions.
Statistics released by SSC show that there are more than 10,000 foreign investors’ accounts, including 640 opened by institutional investors. The figure represents a considerable increase in the number of accounts compared to the end of 2007, when there were only 7,500 foreign investor accounts.
In terms of investment value, the figure of January 2008 saw a little decrease compared to December 2007. Investment value saw a slight increase in February compared to January 2008 ($8bil vs. $6bil). The figure decreased again in March over February.
Pham Hong Son, Head of the Fund Management Division under SSC, said that the decreases in investment value came from stock price decreases, not decreases in foreign capital inflow.
Unlike domestic investors, since the beginning of 2008, foreign investors have purchased more than they have sold. The positive sales volume shows that Vietnam’s stock market is still attractive in the eyes of foreign investors.
In fact, foreign investors once complained that they were having difficulties converting dollars into VND to make transactions due to the government’s decision to tighten monetary policies. However, the situation has improved since the government asked the State Bank to purchase dollars from investors.
In a recent talk with Dau tu chung khoan newspaper, Son denied the opinion that foreign investment funds have been colluding with each other to force prices down so that they could purchase securities at low prices.
Son said that all foreign investment funds want to do business in a healthy stock market. If the market falls, the funds themselves lose money and assets.
Son also said that no institution is powerful enough to control the market.
According to Son, SSC is compiling a draft regulation on managing foreign stock investors. The aim of the compiling committee is to create the best conditions for foreign capital to flow into Vietnam.
The government of Vietnam is considering allowing the establishment of 100% foreign owned investment fund management companies and branches in Vietnam prior to the deadline Vietnam committed when applying for WTO membership (five years after Vietnam official joined the WTO, January 11, 2007).
Currently, foreign investment fund management companies have to invest in the stock market through representative offices. However, under the Commercial Law, representative offices do not have the right to do business. “As instructed by the Prime Minister, we will try to help foreign investors resolve these difficulties in order to create favourable conditions for foreign investment funds to join the stock market more easily,” Son said.
Son stressed that there is now a golden opportunity for investors to make investments. International experts say that investors should buy when the P/E is at 20-25 in emerging markets. Meanwhile, the P/E index now is 10 only, which is really attractive.
Son revealed that SSC has had working sessions with big investment funds and securities companies, which all say that the stock market is still on the right track of development. SSC has suggested institutional investors buy stocks, and once they do, this will help calm smaller investors down.
VNN
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