Vietnam’s stock market attractive in medium and long term

17:01' 11/04/2008 (GMT+7)

VietNamNet Bridge – In the last three consecutive trading sessions, while domestic investors fled, foreign investors pushed up stock purchases, and they now are the main participants in the market at this moment.



In the said three trading sessions, the total sum of money foreign investors injected in the market reached VND769.3bil, while they only sold VND180.2bil worth of shares.



As such, the net purchase value in the last four trading sessions was reportedly at VND591.4bil, the record level since October 2007.



While the big purchases of foreign investors at the moment of the market’s falling surprised many people, Dominic Scriven, General Director of Dragon Capital Investment fund management company, said that it was not a surprise to him at all.



He said that the market has fallen to a level low enough to stimulate purchases.



Mr Scriven, as other foreign investors, is optimistic about Vietnam’s stock market.



According to Dragon Capital, 100 listed companies had the growth rate of 70.7% in profit in 2007 (the figure would be 40% if excluding the profit from finance investments and real estate). The profit of the companies is expected to see the growth rate of 29.3% in 2008.



Dragon Capital estimates that by 2010, the market capitalisation value will be $100bil and the market will see 500 listed companies.



Dragon Capital did not get an operation licence for the first three years of its presence here. It suffered losses the next three years, and only made profit beginning in the 7th year. Therefore, investors should keep a medium- and long-term vision, he said.



When asked if there is a risk of foreign capital leaving the country, Mr Scriven said that he cannot see signs that suggest capital will flow out of Vietnam.



The capital that flows into Vietnam, luckily, is not short-term capital which serves speculation, and there is no sign that shows that foreign investors are trying to withdraw capital from Vietnam.



Vice versa, foreign capital keeps inflowing into Vietnam. It is because of the attractiveness of Vietnam’s financial market. The Libor interest rate is now 3%, while the government of Vietnam offers 8% for its bonds. As such, foreign investors can reap 5.3% profit from the gap between the interest rates. In fact, they have to face risks with exchange rate fluctuations, but the risks are not high in Vietnam.