Although the government has not yet made any official announcement over restrictions on foreign capital that is flooding onto the domestic stock exchanges, the possibility of introducing measures to control inward and outward flows of foreign capital remains, according to a bank official who wishes to remain anonymous and refuses to reveal any further details.
“I have no comment. The decision to carry out such measures is in the hands of the government”, said the source.
In a recent report, economists from the ANZ Banking Corporation, Alex Joiner and Amy Auster, have warned that the government could issue control measures in March 1, 2007.
“In such a situation the government would be willing to impose strong controls and the possibility of stock prices falling is obvious” said the economists.
When asked this in an interview with the foreign media, the SBV’s deputy governor Phung Khac Ke refused to comment.
On January 29 the government made an announcement requiring the banking and financial authorities to consider issuing regulations in order to control the stock market.
Regarding the participation of foreign investors and investment funds, the State Bank of Vietnam (SBV) has been instructed to coordinate with the Ministry of Finance to draft and carry out appropriate measures to ensure a successful surveillance of flows of foreign capital into the local bourses. The SBV has also been instructed to issue additional guidance on the implementation of foreign exchange legislation especially on the deposit and withdrawal of capital by foreign investors.
Under current regulations, foreign investors have to exchange foreign currency for dong and open a dong account at approved banks should they wish to invest in stocks and any stock transactions are then made through these accounts.
Foreign investors will also have to exchange dong into foreign currencies if they want to withdraw capital overseas.
As end of 2006, around US$3 billion of foreign capital has been poured into the local bourses
And if Vietnam imposes restrictions on capital, it might impact on the balance of foreign currencies and the value of the dong, according to financial experts.
The dong has gained 0.25% and 0.02% in value over the past two months respectively, the highest evaluation over the past 11 years which is put down to Vietnam becoming an official member of the World Trade Organisation.