Stock market targets stability over growth in 2016

In Viet Nam, the benchmark VN-Index on the HCM Stock Exchange rose over 6 per cent in 2015 but the HNX-Index on the smaller bourse in Ha Noi declined 5 per cent. - File Photo

"Viet Nam's stock market is forecast to face a range of hurdles in 2016. We should be more prudent in risk management and market operations," State Securities Commission Chairman Vu Bang said at the year-end meeting in Ha Noi.

The domestic market suffered from external factors such as the global market volatility, caused by China's stock rout and the interest rate adjustment by the United States (US) Federal Reserve, as well as the steep plunge in global oil prices.

Capital outflows from emerging markets, including Viet Nam, reached US$504 billion in 2015 and exceeded over $1 trillion in the past two years which had a negative impact on the global stock markets, Bang said.

Stock indexes in developed markets such as the US, United Kingdom (UK) or Australia decreased between 4 per cent and 7 per cent. The drop was much bigger in China's markets.

In Viet Nam, the benchmark VN-Index on the HCM Stock Exchange rose over 6 per cent in 2015 but the HNX-Index on the smaller bourse in Ha Noi declined 5 per cent.

Auction activity was underwhelmed when only 40 per cent of shares were sold out in the auctions, lower than the previous year's 65 per cent. Very few sales saw participation of foreign investors.

Against this backdrop, a string of solutions have been put forth to stabilise and push up the market, especially the issuance of Decree 60/2015/ND-CP dated June 26, 2015, which has eased foreign shareholding ratio in local companies. This regulation together with other policies is expected to develop the market in medium and long-term and encourage more foreign investment inflows.

The local market capitalisation has reached about $59 billion in 2015, equivalent to 34 per cent of the country's gross domestic product (GDP).

However, the equitisation process of State-owned enterprises has not met expectations, Bang said. An estimated 210 businesses will be equitised by year-end, short of the target of 298.

According to Le Minh, deputy general director of the VietFund Management (VFM), forex and interest rates are forecast to be the biggest risks to the Vietnamese stock market in 2016.

Governor of the State Bank of Viet Nam Nguyen Van Binh said this week that the central bank could change the mechanism on foreign exchange management this year to cope with changes in the market, following which the reference rate or inter-bank exchange rate could be changed regularly, even daily.

"Viet Nam's stock market has depended on foreign investment inflows. The foreign sector is awaiting the country's economic development direction after the Party Congress and a clearer view on changes in forex policy," Minh said.

He said the central bank's clear and flexible forex policy would help ease investor worries.

In 2016, SSC Chairman Vu Bang said the commission would continue to implement solutions to boost the market, including the issuance of a circular on regulations in the derivatives market. This circular has been submitted to the Ministry of Finance and is expected to be published in January, 2016.

Le Hai Tra, deputy general director of the HCM Stock Exchange, said the establishment of the common ASEAN Economic Community would help link the stock markets in the region and the exchange has been developing stock indexes to provide more investment tools for global investors.