[Vnbiz] Vietnam SEC plans to ask government to pump in money tosave the stock market

[Hong-Phong_Pho at ita.doc.gov]

Dear anh Dan:
Thanks for the interesting analysis.
Not being a finance expert, I am learning new things from you.
The financial press in Vietnam is also something new, hence the over 
simplification that leads to statement such as "pump in money to save the 
stock market".  I suspect the level of financial sophistication among 
investors as well as decision makers in the Party is also quite low. 
Hence, it is important that policy makers have a good team of competent 
and independent advisors to help them make difficult choices.
I agree with anh Hoanh's first point, but feel the second point needs 
refinement.  Of course transparency and good corporate governance and 
regulations are all important to a healthy financial market, but a total 
swim or sink approach is not entirely workable.  I observe that even here 
in the capitalist epicenter of the World, government leaders employ 
monetary tools to calibrate the economy to avoid 
overheating/hyperinflation or to soften recessions.  Political candidates 
are talking about an economic stimulus package to offset the worse of the 
looming subprime mortgage crisis that's taking the stock market into bear 
territory, and the economy into recession.
I would like to ask anh Dan for additional clarification on your statement 
that "State Bank stopped buying USD from commercial banks so that 
commercial banks can not sell USD to foreign portfolio investors".  How 
does this stop investors from converting USD into VND?  Is VND 
convertibility into USD a problem?
Best,  HPP




"Bui Trong Dan" <dan.trong at gmail.com> 
Sent by: vnbiz-bounces at mail.saigon.com
04/19/2007 12:03 AM
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vnbiz at vietlinks.net


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Re: [Vnbiz] Vietnam SEC plans to ask government to pump in money tosave 
the stock market






[ Vietnam Business Forum ]

Dear anh Hoanh,
 
I totally agree with your two recommendations you posted. However, if we 
see this issue in different angles such as: impacts to the economy and 
society, capital mobilization capacity of listed companies, and IPOs of 
big SOEs, belief of investors in the market.
 
Of course, if the securities market collapses, investors bear the losses, 
other markets seem unstable accordingly. Actually, to date, many investors 
who were interviewed in the TV have reported that they were making loss 
30% to 45% just in few months. There is remarkable portion of investors 
who are retired persons. They are making voice. This could raise a social 
issue.
 
2007 has been seen a huge amount of 90.000 billion VND mobilized via IPOs 
of SOEs and increase capital of listed companies. Some reports of HSBC and 
ML say that this is a problem of dilution of capitalization. On the other 
hand, if the market was not “hot” in last year, companies could not be 
able to mobilize money for business development. 
 
According to Government plan, there will be many SOEs to be equitized 
through IPO in period 2008 – 2010. It is obvious that the Government take 
a lot of “Capital Surplus” through the IPOs. Just an example, the 
Government receive more than 10.000 billion if the VCB IPO of 6.5% capital 
success. This amount can be higher if IPO price of VCB more than 107.000 
VND per share against pair value of 10.000 VND. The next IPOs will be 
Sabeco, Habeco, BIDV, ICB, VietnamAirlines, Mobile and Vinaphone … If the 
market collapses now one anticipates that there is a failure of next IPOs. 

 
Belief of investors is the most important thing. If investors can not keep 
their belief to supports and management of Gov and to transparency of 
market makers they quit without any promise of coming back. And if there 
is no or few buyers and sellers then this can not shape a market. 
 
In the next section, I will discuss about the way the Gov will “pump the 
money in”. Actually, this is not an action of pumping/pouring/opening tap 
money in. This is only the correction of something wrong happened in 2007. 

 
In mid 2007, State Bank regulated a Direction No.03. In the direction, the 
State Bank limited commercial banks to 3% of bank loans for securities (or 
securities is secured assets) of total bank loan balance as at 31/12/2007. 
Immediately, commercial banks stopped this kind of lending and there is no 
money supply to securities investors from bank. Both commercial banks and 
investors believe that this Direction is a violation to bank business 
operations by administration decision. Commercial banks think that they 
can manage risks themselves and they can book doubtful debt provision to 
securities loan at suitable rates. 
 
Another matter that in 2007 the State Bank bough 7b USD and increased M2 
something more than 100.000 b VND. As a matter of fact, more money in the 
circulation and with other reasons, 2007 inflation is two digits. 
Consequently, the State Bank stopped buying USD from commercial banks so 
that commercial banks can not sell USD to foreign portfolio investors. If 
the foreign investors can not convert their USD to VND they can not trade 
in the market. Foreign portfolio investment plays a very important role in 
the local securities market. In 15/1/08, the State Bank bough 30m USD and 
the number increased in the next days, therefore, more VND in the 
circulation. (Yesterday, State Bank announced that they imposed 1% more in 
compulsory reserve to commercial banks)
 
By these two actions, they Gov is saving the market and correcting the 
ways Gov’s governing a market economy.
 
Few food for thought. 
Have a nice day!
Dan 
 
 
 

From: vnbiz-bounces at mail.saigon.com [mailto:vnbiz-bounces at mail.saigon.com] 
On Behalf Of Tran Dinh Hoanh
Sent: Wednesday, January 16, 2008 2:17 AM
To: vnbiz at vietlinks.net
Subject: [Vnbiz] Vietnam SEC plans to ask government to pump in money 
tosave the stock market
 
Dear CACC,
 
www.VNexpress.com today has a new article that Vietnam's Securities and 
Exchange Commission (Uy Ban Chung Khoan) is asking the government to, 
among other things,  pump more money into the market to save the stock 
market. 
 
I am not sure how to pump what money into what and where, but it looks 
like this may not be a good idea.  The Vietnam stock market has been 
running extremely hot due to many unethical trading practices (inside 
trading), hot fad (many people went into stock investment because they 
thought they could make money fast), investor had no clue about stock 
value of a company and simply bought any stocks from any company 
(including brand-new companies with zero track record), abuse of the stock 
market (i heard oral reports that some unethical folks would open a series 
of brandnew companies to sell stock on the market but didn't care if the 
companies would do any business or would survive a month.  They just 
wanted to sell their stocks, got the money and kinda disappeared). 
 
For several years, when everyone was so hot on stock, I kept telling 
people that the stock market wouldn't last long, the whole thing would 
collapse (please check my old messages on this forum), because I knew all 
the stupid games people played.  Now, of course the market is collapsing. 
Why should the government want to pump any money into the market, wasting 
money to save unethical and dumb conducts.  I recommend that the 
government does only 2 things: (1)  Tightening its supervision on the 
market, i.e., enforcing rules on inside trading, tightening regulations on 
how a company can sell its stock to the public--track records and public 
disclosure of financial information, vigorously prosecuting frauds and 
illegal manipulations of the market, and (2) let the market drops, 
survives and recuperates by itself.  The market and investors just have to 
learn how to be smart,m clean and productive. 
 
Have a great day!
 
Hoanh 

-- 
Tran Dinh Hoanh, Esq., LLB, JD
Washington DC _______________________________________________
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