It’s time to mobilize funds: Prudential official

Monday, May 19, 2008
General manager explains stock market performance and offers advice on improving the economy. The Prudential Viet Nam Fund Management Company (PVFMC) the first international fund management firm licensed in Vietnam, now manages some US$1.4 billion and is seeking to mobilize three additional Vietnamese funds worth around $500 million in total.

Acting general manager of the fund, Pham Ngoc Bich, says temporary fluctuations on the financial market could offer attractive investment opportunities.

PVFMC believes that it’s now a good time to launch a number of other securities investment products, Bich says.

Reporter:Are you worried about the current fluctuations on the Vietnamese financial market?

Pham Ngoc Bich: 15 years ago, the Chinese securities market looked the same as the Vietnamese market looks now.

Viet Nam is one of the smallest financial markets in the world.

Its total capital value was $30 billion late last year, smaller than the market capital value of a major bank in Hong Kong.

So, it is easily affected even by minor changes on the local and foreign markets.

Another thing is that Viet Nam has very few securities investors (330,000 stock trading accounts among the country’s population of 86 million), and most lack stock trading experience.

According to the State Securities Commission (SSC), some 70% of the country’s stock trading accounts are owned by individual investors.

Most investors in Viet Nam have focused on shares instead of bonds or fund certificates.

Every time the stock market increases some 5%, many fund certificates gain the same amount even though they are balanced fund certificates.

But according to theory, when the stock market rises by 5%, balanced fund certificates should only be up around 2.5%.

The same fluctuations of fund certificate and stock prices show that investors do not pay attention to the difference between different types of fund certificates.

But it seems that 2008 will not be a successful year for stock trading-at least not as successful as previous years. Correct?

Sure, 2008 will be a tough year for securities firms.

But while the short term forecast is bleak, we are very optimistic about long-term investment.

In the long term, the chaos of the securities market will not strongly affect the funds under our management.

On the contrary, the market’s temporary fluctuations may bring attractive investment opportunities as investors buy stocks at lower prices.

The stock market is currently facing difficulties but we see it’s now a good time to mobilize a number of other stock investment products.

Last year, the securities market grew very fast so no one paid attention to any products other than stocks.

However, it’s changing now.

Investors have more experience and they know more about the risks of securities trading.

Institutional investors usually invest when the market recedes and stock prices fall.

So, we believe that now’s a good time to set up member funds.

We plan to set up more funds this year and over the next few.

We’re looking at a domestic fund, member fund, and other foreign funds.

These funds will be much bigger than our current funds.

We are also preparing to establish an open fund as soon as we get the government’s permission.

Could you talk more about your plans to set up these funds?

The Member Investment Fund in Viet Nam is being mobilized from institutional investors in Viet Nam and foreign organizations with a total value of some $75 million from three to six months.

More than 10% of the fund’s planned capital has already been mobilized.

Another investment fund is also being mobilized from foreign investors with a value of around $200 million.

As Prudential has a large distribution network in Asia, we have sold these investment fund certificates mainly to investors from South Korea, Hong Kong and Singapore as they see a lot of investment opportunities in Vietnam.

Another real estate fund is to complete its capital mobilization of some $200 million and plans to disburse this month.

Has the Vietnamese economy’s recent problem influenced foreign stock investors?

Viet Nam’s economy still has a lot of potential for development.

The real estate markets for offices, buildings, tourism and industrial parks are still growing.

The next two to five years will see more people earning salaries of $5,000 on average a year, though this level equals just one-fifth of the amount of people who earn as much in Hong Kong.

Many investors are still rushing to Vietnam thanks to its low labor costs.

Exports have also been smoother after the country joined the World Trade Organization (WTO).

In your opinion, are speculation funds a threat to a market like Vietnam?

I know a number of speculation funds currently operating in Viet Nam but they are not big and are having problems because the country has not given permission for blank sales and the transactions are made with permitted margins.

These funds are now operating with serial purchases and sales as an exploration of the market.

What do you think about Viet Nam’s move to build a legal corridor for foreign-owned fund management firms?

Viet Nam has many foreign fund management companies operating under representative offices, without permission to conduct trade activities-not an arm of the parent company.

I know that many of them have participated in illegal trade activities.

But these companies are still helpful to Viet Nam.

I think the government’s permission of this is right.

In your opinion, what should Vietnamese authorities do to boost the economy?

It would be good for the State Bank to allow a wider forex margin.

In the long term, the Vietnamese dong must be stronger to accompany the country’s strong economic growth.

Secondly, the country’s trade deficit now is too high.

If the flow of investment capital turns around, this will be a problem.

Thirdly, 60% of products made in Vietnam are raw materials.

For long term success, the country should focus on processed products instead of exporting crude oil, rubber and coffee, and should spend more on developing infrastructure and a processing industry.

The government can also seek advice from veteran economic experts abroad like the Asian Development Bank (ADB) as they once experienced similar problems in South America, China, India and Thailand. (TBKTSG)