Ha Noi (VNA) – Although the Vn-Index in 2007 increased only 25 percent as compared with 146 percent last year, foreign and domestic experts said that a robust growth in the market capitalisation this year will create a “snowball effect” on attracting foreign business circles next year.
This year’s market capitalisation is estimated to reach nearly 496,000 billion VND (around 30 billion USD), making up 40 percent of the GDP as compared with 22.6 percent last year and 5 percent in 2005.
“The larger the market capitalisation is, the higher market transparency is, so this will contribute to drawing more investment from foreign investors and because of that, the market will have a higher liquidity and continue to be more transparent,” General Director of Mekong Securities Company Nguyen Viet Ha said.
Ha guessed that the year 2008 will see a gain in foreign investment into the securities market as big companies, including the Bank for Foreign Trade of Viet Nam and the Viet Nam Insurance Corporation, become listed on the market. “After the two giants listed, the market capitalisation is likely to go up to 43 billion USD,” Ha said.
One factor that Ha attributed to a surge in foreign investment next year is the average growth rate of listed firms’ Earning Per Share (EPS), estimated at 21 percent, higher than that of 10-15 percent in the emerging stock markets in Asia .
The EPS’s average growth rate in 2007 is even higher, reaching 33 percent. Thanks to this figure, Viet Nam doubled its foreign investment into the securities market to 7 billion USD.
The year 2007 saw an increase in funding raised by listed firms through the securities market to 5.6 billion USD, triple the figure last year.
This year also witnessed a spectacular fluctuation in the Vn-index which recovered over 1,100 points only two months after plunging to 883.9 points in early August. It now stands at around 900 points.
“Despite the current weak performance of the market, investors’ confidence in listed companies remains strong,” said Asian Development Bank Country Director in Viet Nam Ayumi Konishi.
Meanwhile, International Monetary Fund Senior Resident Representative Benedict Bingham mentioned the Vietnamese government’s efforts in creating a legal framework for the activities of securities market, saying “the Securities Law that came into force in 2007 is a step in the right direction, as are the steps that the State Securities Commission (SSC) has taken to strengthen enforcement of disclosure and transparency requirements”.
Early next year, a market supervision board will be set up to find violations and take urgent measures to resolve them, SSC Deputy Chairman Nguyen Doan Hung said.
However, foreign and domestic experts said that it is necessary to boost the equitisation process and build a better supervision capacity for SSC and banking system in order to catch up with the market growth.
Further efforts should be made to “develop the market infrastructure such as securities depository, the settlement and trading systems of the stock exchange in order to support the increasing volume of market transactions,” ADB Country Director Konishi said, adding that “there is a lot to be done but the overall trend will certainly be very positive”.
Dragon Capital Director Dominic Scriven said it should not hope for a market of 146 percent increase but EPS’s growth rate, saying the growth pace of 21 percent in EPS next year is a favourable condition for investors in Viet Nam.-Enditem
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