[Vnbiz] Early optimism dims for Vietnam stock market

[Tai Phan]

Early optimism dims for Vietnam stock market


*By Grant McCool <http://www.iht.com/cgi-bin/search.cgi?query=By Grant
McCool&sort=publicationdate&submit=Search>* Reuters


Published: January 28, 2008

*HANOI <http://www.iht.com/articles/2008/01/27/business/invest.php#>:* The
glow has dimmed on Vietnam's young stock market and foreign fund managers
and traders say a recovery from a dire start to the year is unlikely without
an easing of ownership rules and more accurate valuations of new listings.

While this month's losses of almost a fifth mirror declines in other
regional indexes, domestic influences like tighter monetary policy and caps
on foreign ownership are seen as more significant than the global credit
crisis and talk of a U.S. recession that have weighed on more developed
markets.

Foreign investors, who contribute only 20 percent of trading volume, had
hoped several new large share offerings would stimulate the development of
capital markets in Vietnam, where economic growth is 8.5 percent a year.

But this month, Vietnamese market regulators urged companies to consider
further delaying share issues because they believe that the stock market may
not be able to absorb additional securities.

The Ho Chi Minh Stock Exchange index has fallen 16 percent in January after
gaining 23 percent in 2007. It closed up 1.6 percent at 776.04 points on
Friday after sinking to a one-year low the previous session.
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Outside the colonnaded building from the French colonial era that houses the
trading floor stands a sculpture of a horned buffalo goring a bear, but many
investors do not expect bullish prices until at least mid-February, after
the Lunar New Year, or Tet.

Kevin Snowball, director of PXP Vietnam Asset Management in Ho Chi Minh
City, urged more clarity over the timing and valuations of initial public
offerings to reduce uncertainty in the market.

"Otherwise, we'll still be going down when the rest of the world is
re-testing previous highs," Snowball said by e-mail.

The IPOs of four state-run banks had been scheduled to be completed by the
end of last year, but only Vietcombank accomplished that, in late December.

Last week, the authorities announced further postponements of a long-awaited
IPO of Agribank, the top state-run bank, and the share market debut of
Vietcombank. IPOs and stock market trading debuts are separate events in
Vietnam.

The pricing for Vietcombank, the third-largest lender, had also confused
some investors and weighed on pre-listing, or grey market, trading in the
stock. In addition, an IPO for the leading brewer, Saigon Beer Alcohol &
Beverage, or Sabeco, which was scheduled for Monday, was generating
lackluster demand, according to market participants.

"The failure of Vietcombank to trade up following its auction and Sabeco's
undersubscription show that the gloss is off the equitization process," said
Dickon Verey, head of trading at Mekong Securities in Ho Chi Minh City.

The government's plans to reform state-run companies to raise capital were
made in line with commitments made in the country's first year in the World
Trade Organization. The program was begun in 2006 with a doubling of
listings on the exchange. The combined market capitalization of two
exchanges - the other is the over-the-counter Hanoi Securities Trading
Center - is still only about $30 billion.

Vietnam's stock market more than tripled from the end of 2005 to the end of
2007, but no one expects the gains of the past two years to be repeated in
2008. In recent months, Vietnamese investors have been turning to gold and
property, their only investment alternatives.

Options for foreigners are also limited, with investment in the 140 or so
listed companies capped at 49 percent, and 30 percent for banks. The
authorities have not signaled any imminent change.

Government attempts to control inflation by restricting the supply of the
dong, the Vietnamese currency, have also made it more difficult for
foreigners to buy Vietnamese assets.

Along with tighter money supply and the IPO delays, planned taxes on
dividends and capital gains on investments have also dented the market, said
Le Nhi Nang, vice president of the Ho Chi Minh Stock Exchange.

"The number of foreign investors is rising," Le Nhi Nang said, "but our
monetary policy is not accommodating foreign investors."
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