Vietnam Currency Discussion Board

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VIETNAM: Stock market booms as global counterparts fall

Last Updated 13/03/2007 3:50:07 PM


Vietnam's stock market is booming. But even as investors watch as their profits rise, they are worried that the government intends to intervene.

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Presenter/Interviewer: Karon Snowdon
Speakers: Alex Joiner, international economist, ANZ Bank

SNOWDON: Vietnam is starting to get new names, the flavour of the month, a mini-China and the like.

Investment is indeed booming. Equities on the six year old stock market rose by 140 per cent in 2006 and are up another 50 per cent so far this year.

The index hardly noticed the last few weeks when billions of dollars of value were knocked off stock markets almost everywhere else.

There are some technical reasons for that including an under-developed trading system with some unique characteristics.

But according to Alex Joiner from the ANZ Bank, investors will continue to throw money at Vietnam's stock market.

The same goes for foreign direct investment.

JOINER: The target for FDI put out by the government last year was six-point-five billion. It's actually attracted 10-billion in 2006 and this was a significant increase on the six-point-eight billion attracted in 2005. The government is going for 12-billion in 2007 and it's well on the way to achieving that already with over 700-million dollars worth of foreign direct investment in the first two months of this year.

SNOWDON: Part of the growth has come from the corporatisation of former state owned companies.

It's helped double the number of companies on the stock market in the past year and a half.

In that time the market's capitalisation has gone from a small 500 Million dollars to a remarkable 16 Billion.

That sort of volume of money - much of it foreign, builds up pressure, and the steam has to be let off eventually.

The currency the dong has been appreciating against the wishes of the Vietnam State Bank. Alex Joiner:

JOINER: All these pressures have forced the State Bank of Vietnam to install a release valve by widening the trading bands in which the dong operates and this has allowed some pressure to be released, but the currency has appreciated. Only in the past few weeks has the currency again been set at a depreciating rate and it's only then it's broken back through the 16-thousand dong per US dollar mark.

SNOWDON: Now I've seen the word bubble used to describe Vietnam for some time now. Is there any risk of overheating now?

JOINER: Well there's certainly as I've just said there's pressures building up, but to use the words overheating and bubble at this stage is probably a little bit premature.

SNOWDON: It all means a spectacular balancing act by the authorities to encourage the foreign investment Vietnam needs against the capacity of its infant institutions and regulations to cope.

Investors are worried about speculation that won't go away that the Government will impose restrictions, maybe through a capital gains tax to cool down speculation.

Such rumours in China helped drive the nine per cent stock market fall of several weeks ago.

And like in China, Vietnam also poses challenges investors need to be aware of.

JOINER: Well that's certainly true. There is a lot of buzz created around these rapidly growing economies and we only now are seeing the information that we need to sort of actually make the investment decisions crucial to when someone puts their money into an economy such as this. For example the state-owned enterprises are being floated on the stockmarket often do not have independent ratings or audits from independently recognised companies, so people that are investing in some of these stocks are not really getting the full information on the companies that they are investing in. So this transparency is being developed but it certainly is not perfect at the moment.

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