Vietnam inches toward pilot stockmarket
HANOI - Communist Vietnam is edging
closer to opening a pilot stockmarket, but the lack of an
equipped trading floor and firms suitable for listing will make a
year-end deadline hard to meet, analysts say.
Most expect a pilot exchange in southern Ho Chi Minh City to
open sometime next year, although portfolio investors will
hardly salivate due to curbs on foreign share ownership and the
risks associated with Vietnam's nascent private sector.
Nevertheless, analysts said there was interest among institutional
players, if only because Vietnam represented an emerging
market that needed to be tracked.
``The restrictions on overseas ownership are probably not going
to change soon, reducing foreign interest to something of a
cameo role initially,'' said Dominic Scriven, director of Dragon
Capital, which manages two investment funds in Vietnam.
Hanoi's leadership has talked for years about embracing a
bourse -- the most capitalist of practices -- but several
deadlines for a pilot market have already been missed.
The current target according to state media is the end of 1999,
but officials from the State Securities Commission (SSC), the
bourse watchdog, declined to comment on preparations.
The pilot bourse should operate like an over-the-counter
market, with some firms and bond issues listed. A full-fledged
stockmarket would likely take several more years to develop.
Total foreign-held stakes in listed firms have been capped at 20
percent, and foreign securities houses are only able hold a
maximum 30 percent in joint ventures with local brokerages.
Financial sources said while much of the necessary legislation
was in place, a key problem was preparing the physical
infrastructure for the pilot bourse.
The building to be used in the business hub of Ho Chi Minh City
is being renovated but trading equipment has yet to be installed
and the degree of automation has not been decided.
There was also the issue of quality companies.
``The problem I have with all this talk about the stock exchange
is what is going to be traded,'' said Charles Moore, chief
investment officer at Indochina Asset Management (ICAM),
which manages two investment funds in Vietnam.
``There are so few firms with the quality of earnings that would
be required for any stock exchange in the world.''
Twenty firms and banks have applied to float on the pilot
bourse, but most are small, former state companies. Hanoi has
ruled out listing its core businesses such as Vietnam Airlines and
Vietnam Posts and Telecommunications.
Some analysts urged Hanoi not to see the bourse as just a way
of boosting privatisation, which is the thrust of current official
comment on the market's function, but as a way of unleashing
the country's inherent entrepreneurial flair.
``The market could be a vehicle for the private sector, but it
seems the government still sees it as a way of offloading
troublesome state companies,'' said Moore.
Scriven said despite the inevitable hiccups, foreign investors
should look at the big picture.
``This market will symbolise the adoption of core capitalist
principles such as private enterprise, tradeability and the right to
make money,'' he said.
Reuters - August 31, 1999.
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