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Foreigner holdings drop 4 billion USD in 2008
The total value of foreign investors’ holdings on the domestic stock market stood at 4.6 billion USD by the end of 2008, a drop of nearly 4 billion USD from the beginning of the year.
Director of the State Securities Commission (SSC)’s Market Development Department Nguyen Son made the announcement at a seminar held by the SSC on Feb. 4.
He attributed the decline to a strong slump in domestic share prices and foreigners’ accelerated sales amid the world financial and economic turmoil, especially sales of Government bonds and shares that had high liquidity.
According to Son, foreigners’ transaction value on the domestic market averaged at 300 million USD per month last year and mounted to 880 million USD in October when net sale values by overseas clients expanded.
But the capital value withdrawn from Vietnam was insignificant, he said, explaining that slumped liquidity on the local exchange hindered investment outflow. Some capital was shifted to other investment channels such as real estate as foreign investors adjusted their investment portfolios.
The total value of deposits in foreigners’ domestic securities investment accounts is now about 400 million USD, a figure Son said was considered good in the current atmosphere.
Son said accelerated sales by foreigners would put pressure on exchange rates.
“If authorities do not deal with the exchange rate mechanism, it is possible that domestic investors will shift to hold more foreign currencies, which will cause difficulties for the nation’s foreign reserves as well as banks’ liquidity,” he said.
At a seminar held to discuss economic conditions, hosted by the National Assembly’s Economic Committee last month, thinktanks said that interest and exchange rate policies were important tools to regulate the flow of foreign indirect investment into the economy in general, and the stock market in particular.
Experts also suggested the Government consider issuing domestic bonds in foreign currencies since foreign capital had fallen and banks and enterprises might see redundancy of idle capital in the next few months.
The development of the over-the-counter (OTC) market should be sped up, and big equitised firms such as Vietinbank and Vietcombank should be listed on schedule to attract investors.
SSC Chairman Vu Bang told reporters on Feb. 4 that the commission was concentrating on long-term measures in preparation for a market rally, possibly in the third quarter of this year.
The commission would tighten regulations on auditing and licensing new securities firms, he said. It would also restructure the market by putting the Unlisted Public Company Market (UPCoM) into operation and developing a separate bond market within the next few months.
Bang said the commission was also helping securities companies speed up procedures for their capital increases, possible mergers, dissolutions or bankruptcy. He noted that capital shortage was a major challenge facing securities firms.
vna
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