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

[Tran Dinh Hoanh]

Dear anh Dan & CACC,

Good point, anh Dan.  I do know that sometimes government has to jump in to
save a national economic failure and the confidence of investors
is necessary for the market to survive.  But in this case, I do think that
(1) money from the government may not help the situation at all, because the
problems are so massive; they are across-the-board phenomena; money won't be
able to stop the slide and improve confidence, (2) confidence has been lost
and can only be rebuilt by demonstrating the efficiency in the system, and
not otherwise, and (3) adding in the money may just prolong the
mentality that "We can mess up all we can, the government is always there to
help."  The baby just has to learn how to walk.  Instead of putting in
money, probably it is better to question the competency of Vietnam's SEC.

However, I am not really deadset against pumping in money.  I may change my
mind if you have persuasive rationale, anh Dan. So I am all ears for
your next messages  :-)

Great day, brother.

Hoanh
On Apr 18, 2007 11:03 PM, Bui Trong Dan <dan.trong at gmail.com> wrote:

> [ 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
>
>  --
> Tran Dinh Hoanh, Esq., LLB, JD
> Washington DC
>
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