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.
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