Muscling-up liquidity key task for HoSE

What were your views about Vietnam’s 2010 stock market development?

For 2010, the stock market’s key functions of capital mobilisation and transparency have done well. In 2010, the HoSE welcomed 75 new listings, the recorded high in the history, proving that public companies were increasingly looking for more transparency by floating shares on the bourse.

Listed firms were actively mobilising capital via new share sales with 2.8 billion additional share listings. As of December 28, 2010, HoSE has made 30 share auctions and initial public offerings (IPOs) [compared with 18 in 2009], selling 228.6 million shares with proceeds of VND3.33 trillion ($171 million). 

Market capitalisation was in 2010 bigger than 2009. However, its liquidity fell with stock prices decreased sharply, while risk hedge management tools were not applied, resulting in a fact that numerous investors, including institutional ones, suffered huge losses. In 2010, share price manipulation was also concerning. Clearly, the more the market develops the more complicated manipulation cases are.

We think those difficulties are temporary as the market’s price-to-earnings (P/E) was very attractive compared to regional peer, basing on the stronger corporate fundamentals and profits. 

How will the HoSE in 2011 boost liquidity?

A major task in 2011 is to boost market liquidity. In 2010, HoSE has lengthened continuous trading period by additional 15 minutes and proposed to extend trading time into afternoon. If approved, afternoon trading will be key job in 2011, aiming to boost market liquidity. The Ministry of Finance and State Securities Commission have also prepared for other options like margin trading, repo, investment banking and shortening trading times.

To prevent share price manipulation, the HoSE will raise listing standards on registered charter capital, higher minimum founding shareholders for new listing. But more importantly, boosting liquidity is key with more new investors, particularly institutional ones.

The HoSE is also considering applying a new trading system, which is forecast in 2012. The new trading system will help reduce social costs. Especially the new trading system will allow more stock trading and new options.

Foreign portfolio investors are expected to find Vietnam in 2011. What are your views?

Vietnam’s market valuation is relatively cheap with a P/E at 10, compared to 15-20 for regional peers. And foreign investors will be driving force for the time being. Several securities firms from Korea, Singapore, Malaysia, Japan are eying up Vietnam, aiming to own 100 per cent of  local firms by 2012 following World Trade Organization  commitments.

However, Vietnam is still small with few tradable listings. Inflation is also a concern and if Vietnam controls inflation well, foreign investors will arrive.