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Market aims to achieve global standards

Update: July, 30/2012 - 09:57

by Thuy Anh

After 12 years of operation, Viet Nam's stock market has gained encouraging achievements as an important channel for raising funds for the economic development.

During this period, the stock market has mobilised almost VND650 trillion (US$31 billion), most of it (VND550 trillion or $26.4 billion) after 2005. Foreign indirect investment (FII) in the stock market has accounted for around $10 billion.

In the first five operational years, market capitalisation was one per cent of the country's GDP and it reached a peak of 47 per cent in 2007, then stabilised at around 30 per cent over the past several years.

Starting with just two companies listed on the HCMC Stock Exchange in 2000, the figure has increased to over 700 at the two exchanges in HCM City and Ha Noi.

Trading accounts stand now at almost 1.2 million, up from a meagre 2,900 in the initial days.

Finance Minister Vuong Dinh Hue has said significant problems remain despite the achievements, including unstable liquidity, narrow range of listed securities and low effectiveness of capital utilisation.

Other problems he has identified include the large number of securitites trading institutions compared to the scale of the market, their poor risk management capacities and inadequate market infrastructure.

His ministry has submitted to the Government a plan to restructure the stock market.

The plan will focus on improving the quality of securities, diversifying securities products and services, improving corporate governance and enhancing risk management and transparency. International standards and practices will be applied gradually.

The number of financial intermediate institutions will be reduced and securities trading companies' operations will be in accordance with international practices, the plan envisages.

Medium and long-term foreign indirect investment will be encouraged while management and supervision will be tightened to ensure appropriate and timely solutions are applied in case of fluctuations in this segment.

In the short-term, the ministry and State Securities Commission will focus on solutions relating to taxes, investment, consumption stimulation, debts and social security to address difficulties faced by businesses and support economic growth, which will have positive impacts on the stock market.

The HCMC Stock Exchange chairman, Tran Dac Sinh, said plans to upgrade the exchange to international standards began implementation in 2008.

A new building will be constructed for the exchange to provide a better working environment including a modern data centre, apart from a back-up data centre to be built at the Quang Trung Software Park in HCM City.

"HOSE will also invest in an advanced information technology system covering all segments of trading, supervision, information release, registration and custody, clearing and settlement, which will help the use of tools and services available in developed markets," Sinh said.

In order to fight violations which are getting increasingly complicated and sophisticated, HOSE has worked out a criteria for supervision and set up parameters that can quickly detect abnormal transactions and other changes.

HOSE began operation as the HCM City Securities Trading Centre in late July 2000, five years earlier than the other national exchange in Ha Noi.

Rates could fall further

State Bank Governor Nguyen Van Binh has affirmed that the Government and the central bank want interest rates lowered further to ease financial difficulties faced by businesses.

Addressing a meeting held by HCM City People's Committee last Saturday, he said that inflation was under control and if it was kept at below seven per cent, deposit rates might go down to eight per cent this year (for short-term) deposits.

"If the macro-economy stabilises as a result of State policies and joint efforts by all stakeholders, and inflation rate falls to between six and four per cent, the deposit rate can fall to seven per cent and the lending interest rate to 10 per cent per annum," he said.

He also warned that depositors might turn to other investment channels like gold and foreign currency in case the rate is cut without careful consideration.

The central bank would not release large amounts of money to support enterprises as it might lead to another circle of inflation, he said.

Referring to complaints that the current lending interest rate of 15 per cent was still high, and that access to bank loans was still narrow, he said businesses benefited from recent policies involving debt restructuring.

Compared to previous months, a rate below 15 per cent was still significant, he said.

Urged by the central bank, commercial banks have reduced interest rates on old loans to 15 per cent.

As of July 15, existing loans with interest rates of more than 15 per cent stood at 60 per cent of total outstanding loans. On July 27, it came down to 35 per cent.

Commercial banks including Sacombank, Eximbank, DongA Bank, ACB, BIDV and VIB have all earmarked large sums of money to provide preferential loans for enterprises with highest interest rates at 13 per cent.

In HCM City, banks have provided VND26.6 trillion ($1.28 billion) in loans to priority sectors of agriculture, production for export, small and medium enterprises and supporting industries.

Real estate loan deals

The announcement by banks that they are lowering lending rates for property buyers has prompted sales launches by many developers.

The Viet Nam International Bank (VIB) is offering VND1 trillion (US$48 million) for those who wish to buy or build a house or repair their existing ones at an annual interest rate of 9.9 per cent for the first three months. Customers can get loans of up to 90 per cent of their total requirement.

ANZ Viet Nam has set a lending rate of 13 per cent for long-term loans of up to 20 years. Retail banking director Duong Duc Hung advised buyers as end-users should make their decision now, when prices and interest rates have reached reasonable levels.

The Nam Long Investment Joint Stock Company will put on offer next month over 300 "affordable" apartments in the first phase of its E-Home 3 Tay Sai Gon project in Binh Tan Dist. Prices begin at VND615 million per unit. Sales of its first 70 townhouses in the Nam Long – Bac Sai Gon Project in Binh Duong Province have already been launched at around VND870 million.

Also in Binh Duong, developer Setia Lai Thieu began last Saturday sales of both townhouses and twin villas in its Eco Xuan Project with prices ranging between VND2-4 billion, promising discounts for timely payments, those making full payment up front, and customers purchasing in groups.

In Dong Nai Province, two projects – Lavender City in Vinh Cuu Dist. and Sunflower City in Nhon Trach – have entered the market offering land lots for town houses and villas. — VNS

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