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

[Quach Manh Hao]

Dear anh Hoanh and CACC,

I just want to add another view on the current situation. We all talked
about the surplus supply, and the government knew that. When they announced
VCB offering, they sent a clear message that they would no longer sell the
state-assets at low prices. I expected the goverment would do something to
warm up the market prior to the offering. But they did nothing. I guess that
was because the government wanted to let the market as it would be (i.e. anh
Hoanh's idea), and it is now. But what indeed happened? The governement, as
most of Vietnamese, were never aware of the danger of lacking committment on
IPO schedules and policies in support. As a result (my story), foreign
investors, who are most scared of policy risk, decided not to be in, and
consequently the domestic but inexperienced investors. Market drop (at this
level) was seen mostly from investor confidence, but it was true to reflect
the risk-return consideration. The recent response by the government to pump
some money to the market can not pull back the market in a week or so, and
the newly converted Dong would not be invested at this confidence level. I
see no future but that if the government would ask the listed companies to
repurchase their shares :)) it's a reasonable step as they have been
benefited from high valuation before. But I also see a danger of bubbles in
real estates sector if the stock market continues to be cold.

Cheers,
Hao Quach

On Jan 20, 2008 9:29 PM, Tran Dinh Hoanh <tdhoanh at gmail.com> wrote:

> [ Vietnam Business Forum ]
>
>
> Dear Thanh An & CACC,
>
> The banking system is very different from most non-banking sectors.
> Banking is the backbone of the national economy. When there is banking
> crisis, the government has no choice but coming in for the rescue.
>
> The stock market can also be another kind of backbone.  But the Vietnamese
> stock market is no where close to that status.  The VN stock market is very
> new, very small and still plays a relatively insignificant role in the
> economy (other than making a small number of people rich very quickly).  If
> the entire market collapses now, the economy will still going strong (though
> it may hurt a little).  That is why I think that letting it collapse on its
> own and rebuilding it is much easier than patching it with bandages here and
> there.
>
> Have a great day!
>
> Hoanh
>
> ________________
> On Jan 20, 2008 8:56 PM, Pham Thi Thanh An <thanhan2505 at gmail.com> wrote:
>
> > [ Vietnam Business Forum ]
> >
> >
> >  Dear CACC,
> >
> >
> >
> > I find the following recent article on the FT on state invervention to
> > rescue the current subprime mortgage crisis is particular relevant to our
> > thread of discussion on the stock market situation in Vietnam, so post it
> > here to share with you.
> >
> >
> >
> > As Martin Wolf, a fairly famous columnist of the FT argues here, even if
> > state rescue is seen as an undesirable encouragement of repeated mistakes,
> > failure to do so is often not a choice simply because of the
> > historically-proven unbearable consequences for the public!
> >
> >
> >
> > Yet, he also argues that doing more and better with market regulations,
> > even in this most difficult sector of money dealing is not impossible!
> >
> >
> >
> > Hope you enjoy the reading!
> >
> >
> >
> > Best,
> >
> > Thanh An
> >
> > email: thanhan2505 at gmail.com
> >
> > ____* Why regulators should intervene in bankers' pay*
> >
> > By Martin Wolf
> >
> > Published: January 16 2008 02:00
> >
> > You really don't like bankers, do you?" The question, asked by a former
> > banker I met last week, set me back. "Not at all," I replied. "Some of my
> > best friends are bankers." While true, it was not the whole truth. I may
> > like many bankers, but I rather dislike banks. I recognise their necessity,
> > but fear their irresponsibility. Worse, they are irresponsible partly
> > because they know they are necessary.
> >
> > My attitude to the banking industry is not a prejudice. It is a
> > "postjudice". My first experience with out-of-control banking was when I
> > watched the irresponsible lending that led to the devastating
> > developing-country debt crises of the 1980s.
> >
> > The world has witnessed well over 100 significant banking crises over
> > the past three decades. The authorities have even had to rescue important
> > parts of the US financial system - on most counts, the world's most
> > sophisticated - four times during the same period: from the developing
> > country debt and "savings and loan" crises of the 1980s to the commercial
> > property crisis of the early 1990s and now the subprime and
> > securitised-credit crisis of 2007-08.
> >
> > No industry has a comparable talent for privatising gains and
> > socialising losses. Participants in no other industry get as
> > self-righteously angry when public officials - particularly, central bankers
> > - fail to come at once to their rescue when they get into (well-deserved)
> > trouble.
> >
> > Yet they are right to expect rescue. They know that as long as they make
> > the same mistakes together - as "sound bankers" do - the official sector
> > must ride to the rescue. Bankers are able to take the economy and so the
> > voting public hostage. Governments have no choice but to respond.
> >
> > Nor is it all that difficult to understand the incentives at work. I
> > gave the broad answer in my column, "Why banking is an accident waiting to
> > happen" (Financial Times, November 27 2007).
> >
> > It is the nature of limited liability businesses to create conflicts of
> > interest - between management and shareholders, between management and other
> > employees, between the business and customers and between the business and
> > regulators. Yet the conflicts of interest created by large financial
> > institutions are far harder to manage than in any other industry.
> >
> > That is so for three fundamental reasons: first, these are virtually the
> > only businesses able to devastate entire economies; second, in no other
> > industry is uncertainty so pervasive; and, finally, in no other industry is
> > it as hard for outsiders to judge the quality of decision-making, at least
> > in the short run. This industry is, in consequence, exceptional in the
> > extent of both regulation and subsidisation. Yet this combination can hardly
> > be deemed a success. The present crisis in the world's most sophisticated
> > financial system demonstrates that.
> >
> > I now fear that the combination of the fragility of the financial system
> > with the huge rewards it generates for insiders will destroy something even
> > more important - the political legitimacy of the market economy itself -
> > across the globe. So it is time to start thinking radical thoughts about how
> > to fix the problems.
> >
> > Up to now the main official effort has been to combine support with
> > regulation: capital ratios, risk-management systems and so forth. I myself
> > argued for higher capital requirements. Yet there are obvious difficulties
> > with all these efforts: it is child's play for brilliant and motivated
> > insiders to game such regulation for their benefit.
> >
> > So what are the alternatives? Many market liberals would prefer to leave
> > the financial sector to the rigours of the free market. Alas, the evidence
> > of history is clear: we, the public, are unable to live with the
> > consequences.
> >
> > An alternative suggestion is "narrow banking" combined with an
> > unregulated (and unprotected) financial system. Narrow banks would invest in
> > government securities, run the payment system and offer safe deposits to the
> > public. The drawback of this ostensibly attractive idea is obvious: what is
> > unregulated is likely to turn out to be dangerous, whereupon governments
> > would be dragged back into the mess.
> >
> > No, the only way to deal with this challenge is to address the
> > incentives head on and, as Raghuram Rajan, former chief economist of the
> > International Monetary Fund, argued in a brilliant article last week
> > ("Bankers' pay is deeply flawed", FT, January 9 2008), the central conflict
> > is between the employees (above all, management) and everybody else. By
> > paying huge bonuses on the basis of short-term performance in a system in
> > which negative bonuses are impossible, banks create gigantic incentives to
> > disguise risk-taking as value-creation.
> >
> > We would be better off with Jupiter's 12-year "year", since it takes
> > about that long to know how profitable strategies have been. The point is
> > that a year is an astronomical, not an economic, phenomenon (as it once was,
> > when harvests were decisive). So we must ensure that a substantial part of
> > pay is better aligned to the realities of the business: that is, is made in
> > restricted stock redeemable over a run of years (ideally, as many as 10).
> >
> > Yet individual institutions cannot change their systems of remuneration
> > on their own, without losing talented staff to the competition. So
> > regulators may have to step in. The idea of such official intervention is
> > horrible, but the alternative of endlessly repeated crises is even worse.
> >
> > The big points here are, first, we cannot pretend that the way the
> > financial system behaves is not a matter of public interest - just look at
> > what is happening in the US and UK today; and, second, if the problem is to
> > be fixed, incentives for decision-makers have to be better aligned with the
> > outcomes.
> >
> > The further question is how far that regulatory net should stretch. I
> > believe it should cover all systemically important financial institutions.
> > Drawing the line will not be simple, but that is a problem with all
> > regulation. It is not insoluble. The question the authorities need to ask
> > themselves is simple: if a specific institution fell into substantial
> > difficulty would they have to intervene?
> >
> > If the conflict of interest that dominates all others is between
> > employees and everybody else, then it must be fixed. All bonuses and a
> > portion of salary for top managers should be paid in restricted stock,
> > redeemable in instalments over, say, 10 years or, if regulators are feeling
> > generous, five. I understand that the bankers will not like this. Yet one
> > thing is surely now quite clear: just as war is too important to be left to
> > generals, banking is too important to be left to bankers, however much one
> > may like them.
> >
> >
> >
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> >
>
>
> --
> Tran Dinh Hoanh, Esq., LLB, JD
> Washington DC
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