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Foreign investors now hesitant to inject their money in Vietnam’s stock market
Foreign investment funds believe that the Vietnamese stock market still won’t be able to attract foreign capital in the time to come, since investors have worry about the macro economy.
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| Kevin Snowball from PXP Asset Management said that the Vietnamese economy is now gloomy with high interest rates and high inflation. |
Kevin Snowball from PXP Asset Management said that the Vietnamese economy is now gloomy with high interest rates and high inflation. The moves taken by the government so far this year have helped settle some problems: The dong/dollar exchange rate has become more stable, while the consumer price index (CPI) increases have been slowing down. However, economists still believe that the inflation rate of the whole year 2011 would be 18 percent or higher.
The Vietnamese stock market now reflects all the difficulties of the national economy, as the securities liquidity always stays lows, while the indexes have been improved just a little. All these factors have made foreign investors become more hesitant to pour money into Vietnamese stocks.
Director of Standard Chartered Bank, in charge of Indochina, Louis Taylor, also told Thoi bao Kinh te Saigon that the biggest interest of foreign investors when investing in other countries is the current business operation result and the future of businesses. Meanwhile, in Vietnam, foreign investors are most concerned about the laws and the macroeconomic situation. At present, the biggest worry of the investor is the depreciation of the dong.
The banker has suggested that there are two things that the government of Vietnam needs to do to settle the problem. Though the government has applied administrative measures to call on people to use dong instead of the dollar, but this proves to be not enough, and it is necessary to apply more drastic measures to force people to use dong.
For example, Vietnam should ban the real estate transactions where payment is made in gold, or it should prohibit sellers to post sale prices in foreign currencies.
He also stressed that easing the pressure on the inflation should be seen as an urgent task, adding that if the inflation can be curbed, other macroeconomic problems could be more easily put under control.
Kevin Snowball of PXP Asset Management believes that the government needs to find the way to increase the foreign currency reserves, so as to improve its power when regulating the foreign currency market.
It is clear that the exchange rate directly influences the benefits of foreign investors. Therefore, if the foreign exchange can be stabilized, this would help restore the investors’ confidence and make them feel more secure when disbursing money in the stock market.
Nguyen Xuan Minh, General Director of the Vietnam Asset Management Ltd (VAM), said he thinks more foreign money would be withdrawn in 2012 than in 2011. Fund management companies would have to make presentations to persuade shareholders to continue investing in Vietnamese stocks. However, this proves to be a difficult job, especially when a lot of investment funds have reported losses due to the continued stock price decreases.
Meanwhile, analysts said they cannot see many opportunities to attract new capital flow, because the global economy has been in bad situation, and the Vietnamese economy has not prospered yet.
Representatives of investment funds have suggested that Vietnam should consider resuming the equitization process in order to provide more “good commodities” to the stock market. The State Securities Commission has been urged to improve the transaction methods, especially, it is necessary to lengthen the time for afternoon’s transactions.
Besides, it is advisable to issue the regulations relating to the operation of open funds. Once open funds come out, experts believe, this would help attract more capital to the market.
The lack of the transparency of the market has always been a big problem in the eyes of foreign investors, despite the efforts by the watchdog agency to promulgate new regulations to make the market more transparent and healthier. A lot of foreign investors say they do not feel reliable with the finance reports of Vietnamese enterprises.
vietnamnet, SGTT
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