~ Le Viêt Nam, aujourd'hui. ~
The Vietnam News

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[Year 2002]

Don't hold your breath

Following in China's footsteps, Vietnam at this point is just another underdeveloped, potentially vibrant equities market. "Potentially" is the key word. The Ho Chi Minh City exchange is just 30 months old, and it is not even close to fulfilling its promise. The small number of foreign investors involved are mostly playing for fun, and larger investors either don't consider Vietnam at all or can barely imagine a time when it will have grown enough to merit their attention.

Twelve foreign institutions and 48 foreign individuals, most living in Vietnam, are registered to trade on the exchange. Most of the individuals are ethnic Chinese from Hong Kong and Taiwan, but there are also a few from Japan, a couple from South Korea and a couple more from Europe and the United States.

By far the leading foreign institutional investor, accounting for more than half of all shares owned by foreigners, is Dragon Capital, fund manager for Vietnam Enterprise Investments Ltd. Foreign individuals are restricted to owning no more than 3% of a company; individual institutions face a 7% limit. In most cases, total foreign holdings can't exceed 20%.

Foreigners are nowhere near their limit. Based on August figures, the value of foreign investors' holdings was $15.4 million, about 8% of total market capitalization. Dominic Scriven, a director of Vietnam Enterprise Investments, doesn't see foreigners taking a big role in the market any time soon: "Vietnam should not rest its hopes on foreign investors in the stockmarket."

For now, restrictions on total ownership, the ability of foreigners to repatriate profits out of Vietnam, the size and breadth of companies available to be traded, and the transparency and corporate governance of the counters that are tradeable are all issues that make foreigners wary. Clifford Tan, director of market analysis in Asia for Salomon Smith Barney Singapore, says the Ho Chi Minh City exchange is less developed than Shenzhen and Shanghai were at similar stages in China a decade ago. "Outsiders think about Vietnam's stock exchange very little," he says. "The market is basically not going anywhere."

By Margot Cohen - The Far Eastern Economic Review - November 21, 2002.