The stock market would be the main channel through which long-term capital would be brought into Vietnam, according to a finance ministry plan to develop the national economy between now and 2020. Under a plan approved by prime minister Nguyen Tan Dung earlier this month Vietnam’s stock market capitalisation is set to account for 70% of the country’s gross domestic product (GDP) by 2020.
Between now and 2010, all of the major state companies, including large commercial banks, would list their shares on the stock market, which would account for 50% of the GDP, according to the Ministry of Finance.
The first half saw a total value of 60 trillion dong (US$3.8 million) raised by both share and bond issues at the HCM City and Hanoi markets. The figure made up about 6% of national GDP for the period.
Over the first six months, 66 companies issued over 1.4 billion shares at par to raise over 30 trillion dong (US$1.88 billion). The market also saw the sale of 82 trillion dong worth of government, urban and corporate bonds, equal to 8.3% of the country’s GDP last year.
Total stock market capitalisation had reached 280 trillion dong (US$17.5 billion) by late July, up 25% year-on-year. Market capitalisation for the first half of this year alone has made up 28.8% of 2006′s total national GDP.
The HCM City market is home to 112 listed stocks, including two funds, while the Hanoi exchange has 87 firms trading shares. The finance ministry’s development strategy gives top priority to adapting stock market structure and operations to international norms and integrating Vietnam’s exchanges with regional and international markets.
While more capital must be sourced from both domestic and overseas channels, the ministry’s plan also emphasised the necessity of accelerating the equitisation process. Bond diversification, including the methods of issuing government bonds, urban bonds and corporate bonds, would be vital to achieving the country’s economic goals.
Viewing the country’s bond market as too small, the ministry will establish and facilitate a market for bonds and debt instruments.
The government has approved a US$1 billion sovereign bond issue this year to raise funds for some key refinery, power, and cargo ship projects. The fourth quarter issue will mature after 15 or 20 years.
The finance ministry originally planned last year for a US$500 million bond issue.
In October 2005, when Vietnam came out with its maiden sovereign dollar bond issue, the size was upped from US$500 million to US$750 million after building an order book of US$4.5 billion.
In March ratings firm Moody’s upgraded its outlook for Vietnam’s foreign-currency bonds to positive from stable, while Fitch Ratings assigned BB-for Vietnam’s long-term foreign currency Issuer Default with a stable outlook.