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Stock market predicted to recover slightly in 2009
This year, Vietnam ’s stock market will face numerous difficulties as a result of the global economic crisis, and may only show small signs of recovery as the year progresses, according to the State Securities Commission (SSC).
Speaking at a seminar examining the impact of accession to the WTO on the flow of foreign investment into Vietnam, held in Hanoi on January 9, SSC Vice Chairman Nguyen Doan Hung said that the stock market is governed and greatly affected by the macro economy and businesses’ operations, which are currently absorbing the negative impacts of the global economic crisis.
This means that Vietnam will have to overcome more difficulties that will affect production, import-export, banking and finance activities, indirect investment, and payment balance, he said, adding that these are the factors that will directly influence the recovery of the stock market.
To limit these adverse impacts, maintain stability and improve market conditions, Hung stressed the necessity of implementing a range of simultaneous measures, including promoting over-the-counter (OTC) and bond transaction markets, making improvements to infrastructure and technology, as well as increasing levels of financial transparency.
Besides speeding up the equitisation process to ensure business renovation programmes can be carried out, creating high-quality products for the stock market, and attracting investment flow, the country needs to work to improve the financial capacity of the banking sector through allowing banks to sell their stakes to foreign partners at rates of less than 5 percent without needing permission from the central bank, and raising foreign ownership limits in banks to 35 percent, he added.
Hung also recommended a temporary postponement of imposing personal income tax on securities investment activities, including taxes levied on revenues, dividends and bond interests, and suggested the establishment of a fund to support the market when it plunges beyond a certain level and to stimulate demand when the market shows signs of recovery.
2008 was the most volatile year yet for the Vietnamese stock market, as the VN-Index tumbled from 912.07 points in the first trading session of the year to 288.85 points on December 12, a return to the dark financial times experienced four years ago.
Plummeting stock indexes were followed by a sharp decrease in market liquidity. Last year, stock market capital accounted for just 17.5 percent of the country’s GDP, and the total capital mobilised through the market reached just 25,000 billion VND, compared to the 127,000 billion VND mobilised in 2007.
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