Communist Vietnam's stock market experiment slows after roller-coaster first two years
HO CHI MINH CITY, Vietnam - About a hundred people fill the chairs on the
trading floor, chatting or reading newspapers, glancing only occasionally at the
glowing numbers on the board in front of them.
The numbers change slowly, reporting volume of just 3 billion dong (dlrs
200,000) for the day's single-hour trading session.
Trading on communist Vietnam's first stock market — 2 years old last week —
is a far cry from the heady days of a year ago, when speculators desperate for
anticipated profits made it the world's best-performing market for the first six
months.
Fortunately, it's also far different from the steep plunge that followed. Falling
prices so enraged speculators that they threatened to kill the exchange's
director, Tran Dac Sinh.
"There were some death threats. But now I think investors can understand the
stock market better," Sinh says. "At that time investors thought I was
manipulating the prices. We had to have police assistance."
Regulators say the recent stability of the market, in southern Ho Chi Minh City,
is a sign it has already begun to mature, as investors who once believed the
exchange would only climb higher no longer view it as a source of risk-free
quick gains.
But traders complain that the small number of listed companies — just 17, less
than twice the nine registered brokerage firms — and tight government trading
controls are keeping volume low and limiting the market's role as Vietnam's
economy shifts from tight state control to private enterprise.
More than 10,000 people have trading accounts, but only about 400 now trade
regularly, brokerage officials estimate. Most know each other from the hour they
spend together each day, looking vainly for buyers for stocks that have fallen
sharply in price from a year ago.
After debuting at 100 points in July 2000, the market index hit a high of 571.04
on June 25 last year, and now hovers at about 200. The low level of foreign
investment has helped it avoid much of the recent carnage on other markets.
Kim, a 43-year-old market player who bought over 100,000 shares at bargain
prices shortly after the market opened, watched for months as prices
skyrocketed and then plunged, unable to cash in most of his gains.
"It's difficult to sell with such a small number of stocks and traders," says Kim,
who gave only one name.
All but one of the 17 listed companies are former state-owned enterprises
converted into stock companies. None has used the market yet to issue new
stock.
Just five companies were added last year and seven so far this year, despite
early promises by the State Security Commission to list as many as 20 each
year.
Securities analysts estimate that 50-60 out of Vietnam's 4,000-6,000 joint stock
companies meet the listing criteria, but many long-protected state enterprise
managers remain leery of public disclosure requirements.
"It's not only state enterprises. We all have to learn a new culture, a
commercial culture," says Ly Xuan Hai, general director of ACB Securities
Company.
In an attempt to attract more companies, the government is offering tax breaks,
lower land rents and preferential access to bank loans to those that list.
It also is proposing a three-year tax exemption on repatriated profits for foreign
stock investors.
But dissatisfied investors say tight trading regulations should be relaxed so the
exchange can develop freely — like Communist China's fledging markets in
Shanghai and Shenzhen in the early 1990s. Weak Chinese regulatory
enforcement and massive speculation caused those markets to expand rapidly,
leading to huge price gains — as well as large losses. China is still paying the
price for allowing companies with weak fundamentals and poor management to
go public, analysts say.
Vietnamese officials say they want to avoid those mistakes by keeping a tight
rein on the Vietnamese market's growth.
"We had to study and l earn from China's experiences. We had to create a
legal structure first and then open the market," Sinh says. "Now we have to
perfect that legal framework."
Following last year's steep price rises, regulators limited the amount of buy
orders that traders could place each day and cut the daily trading band for each
stock. That scared off speculators, who began disposing their stocks, sending
prices sharply lower.
The exchange has become more stable since the beginning of this year, but
many investors remain disappointed.
"The market has not developed as quickly as I expected," said Hai, the
brokerage firm head. "At first we expected a very big future, and that the future
would come to us very quickly. Maybe it was just our enthusiasm."
Market officials say they're being held back now by cautious regulators in
Hanoi, Vietnam's capital, who are reluctant to surrender their control over the
fledgling market.
"The biggest problem is how to persuade the regulators in Hanoi to do the
process faster," says Sinh. "We have to help everyone understand how a
market operates — the investors as well as the regulators."
By David Thurber - The Associated Press - July 25, 2002.
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