Great expectations for Vietnam's rising stock market
Vietnam's stock index has risen to a record, propelled by optimism generated by new listings, expectations that more companies will join the bourse and a Merrill Lynch report on the country's growth prospects.
The VN Index rose 3.8 percent Friday to close the week at 591.4, topping Thursday's 571.2, which had been the highest close since June 2001. The index, which includes all companies listed on the Ho Chi Minh City Securities Trading Center, has surged 92 percent this year, pushing the market value of the bourse past $1.9 billion.
Kinh Do, a maker of bakery items, listed in December as what was then the exchange's biggest stock. In January, Kinh Do was trumped by Vietnam Dairy Products, known as Vinamilk, whose listing doubled the bourse's market value. Vinamilk is the country's top milk producer and also plans to build a beer plant in Vietnam together with SABMiller.
"Kinh Do is a major local brand name, and everyone knows Vinamilk, which has solid profits," said Horst Geicke, chairman of VinaCapital, manager of the London-listed Vietnam Opportunity Fund. "The Merrill Lynch report brought more foreigners in, though I don't know how much impact it had on local investors."
Merrill Lynch's 52-page February report said economic growth, policy changes, and the Vietnam's capital market "demand attention," terming Vietnamese shares a 10-year buy.
"In late November and early December, I was marketing in the U.S. predominantly to hedge funds, and I started to get questions about Vietnam," said Spencer White, chief equity strategist for the Asia-Pacific region for Merrill Lynch, in a March 15 interview in Hanoi. "It was the first time anyone had ever asked me about Vietnam."
Foreign investors' interest was piqued in October, when the Vietnamese government raised $750 million in its first sale of foreign-currency denominated debt.
In February, Intel said it would invest as much as $605 million in Vietnam, and a unit of Taiwan's Ta Ya Electric Wire & Cable sold shares of its Vietnamese unit on the exchange, the first listing on the bourse by a foreign company.
At the Ta Ya listing, Ho Chi Minh City Securities Trading Center Director Tran Dac Sinh told journalists that by June Saigon Thuong Tin Commercial Joint Stock Bank would probably become the first bank to list on the exchange.
Gates sees potential
Bill Gates, the chairman of Microsoft, said Vietnam has the potential to develop as an outsourcing center similar to India, during his first visit to Vietnam over the weekend.
Gates met Prime Minister Phan Van Khai and President Tran Duc Luong in Hanoi on Saturday, before crossing town to take questions from students at the Hanoi University of Technology. The visit by the founder of the world's biggest software company takes place two months after Intel, the world's biggest semiconductor maker, said it would build a plant in Vietnam.
While the U.S. government says infringement of intellectual property rights is rampant in Vietnam, the nation of 84 million people is attracting the attention of global technology companies, lured by economic growth exceeding 8 percent a year and an estimated literacy rate of at least 90 percent.
"It's great that Intel is coming here, and no doubt that other information- technology manufacturers will see the kinds of skills" in Vietnam, Gates said in Hanoi. "But in no sense should Vietnam specialize in manufacturing. Vietnam should also focus on software development, outsourcing. There's an opportunity to do call centers."
Citing the example of India, Gates said "hopefully Vietnam can also be a country that grows the capacity to supply skills to other countries, including the U.S."
The estimated value of Vietnam's industry for software-related and information technology-related services was $170 million in 2005, with the industry growing at an annual rate of about 40 percent, according to the Vietnam News.
Vietnam now has about 600 software- development companies employing 15,000 workers, up from 170 companies employing 5,000 in 1999, according to the report.
By Jason Folkmanis - Bloomberg News - April 23, 2006.
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