[Vnbiz] Capital controls off Hanoi's radar

[Phan, Tai]

Capital controls off Hanoi's radar

Thursday, March 01, 2007

Vietnam's prime minister said it is "not yet necessary" to set controls on capital flows in and out of the country, following a flood of overseas investment that contributed to a more than 50 percent surge on the stock market in two months.
Financial service companies including Australia & New Zealand Banking Group, Citigroup, Credit Suisse Group, JPMorgan Chase and Merrill Lynch have said in notes to clients over the past month that Vietnam's government was pondering capital controls, in response to what Credit Suisse described as "excessive exuberance" among investors.

"It is not yet necessary to take the urgent measures controlling foreign portfolio capital flows which the State Bank of Vietnam proposed," according to a letter from Vietnam's Government Office, posted on a government Web site and giving instructions from Prime Minister Nguyen Tan Dung on measures to strengthen the management of Vietnam's equity markets.

The Ho Chi Minh City Securities Trading Center's VN Index has surged 51 percent this year, amid rising investor confidence that Vietnam's ruling Communist Party will sell stakes in state companies and maintain economic growth rates exceeding 8 percent. Vietnam, which joined the World Trade Organization last month, is 20 years into a transition to a market-based economy.

The market value of the shares of the 107 companies traded on the Ho Chi Minh City bourse has reached US$16.1 billion (HK$125.58 billion), up from about US$500 million at the end of 2005. The Government Office letter cited Dung as saying the country's stock market has made "rapid progress" and become an "important channel for mobilizing capital."

Dominic Scriven, a director of Ho Chi Minh City-based fund managers Dragon Capital, said: "Capital controls appear to be off the radar screen for now." 

In a letter in January, Dung called for greater scrutiny of securities companies and fund managers, improved dissemination of information, and better monitoring of the activities of banks involved with the stock market. The latest note called on relevant agencies to "promptly and completely" carry out instructions of the previous letter.

It said government agencies should "check, inspect and supervise to ensure that all relevant state regulations are executed by individuals and organizations operating in the stock market."

Dung also called for speeding up the sale of state companies to bring more supply to the market. Two of the three biggest companies by market value on the Ho Chi Minh City bourse - Vietnam Dairy Products Joint-Stock and Pha Lai Thermal Power Joint-Stock - are majority-owned by the government.

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