World Bank: Viet Nam Stock Market Needs Institutional Investors, Investment Caps

Thursday, May 15, 2008
Noritaka Akamatsu, the World Bank’s securities analyst in Viet Nam said the local stock market needs to attract professional institutional investors and caps on investment portfolios to help recover the slumping market because investors cannot buy all the securities in the market.

“The stock market is suffering a systematic but minor problem: banks lent securities investment and also let their affiliates carry out financial investment. If problems arise, these banks must protect their mortgaged valuable securities by trying to recover their loans for securities trading, which forced the mortgaged securities investors to sell off their shares and the stock market to dip further.” Noritaka Akamatsu said.

The World Bank analyst also proposed that the problem should be dealt with, more importantly, investment funds should be diversified, including the pension funds and insurance funds, Viet Nam will no longer have to cope with the problem, the newspaper said May 5.

Unluckily, Viet Nam has no funds like that, investing in the securities market is too risky and speculation may shock the market, the World Bank official warned.

To cool down the overheated market, the State Bank of Viet Nam issued Instructive 03 to ask commercial banks to limit loans for securities investment, which caused the fault, he pointed out.

To dodge the instructive, banks started to slash loans for securities trading and raised total outstanding loans, he added.

Instead, banks shifted to providing loans to invest into property, to buy other assets, he said, warning that problems caused by the property market are more serious than those by the stock market.

So far total loans lent by banks to invest into the property market account for 10 per cent of total credits, however, the real math is much higher, he said.

Bonds are a key instrument, compared with the stock market, he added.

Regarding the dominant stake holding by the State in the process of selling shares in state-owned enterprises via initial public offerings, the government should reduce its ownership step by step and diversify share-offering channels, he said.

Viet Nam’s shares index lost 1.66% at 492.09 points on local selling on fear of further falling prices due to lack of dong under the tightened monetary policy being adopted by the government of Viet Nam to curb galloping inflation. (Vietnam Economic Times)