The establishment of Vietnams first equity market on July 20, 2000 marked an important step in the country’s transformation to a market based economy. In the last four years, development of the stock market has been far less than expected.
Last year, the State Securities Commission granted listing licenses to just four companies, raising the total listed firms to 26. Up to 30 million VF1 certificates worth dong 300 million were listed, creating a new investment tool, and helping establish a collective investment mode in Vietnam. This showed that business are slowly becoming aware of the benefits of a public offering, such as a different channel from banks to raise capital, and the image boost of being recognised as a listed company. Moreover, investors have more opportunities to expand their investment portfolio. Listed companies made greater efforts to improve corporate governance and most listed companies performed fairly well in 2004.
Second, the stock market’s role as mobilising channel of medium and long-term capital has been gradually confirmed. Five listed companies issued additional shares totalling 45.5 billion dong to cash and another two companies, Gemadept and REE are about to issue more shares to partially pay 2004 dividends in shares.
Last year also saw two more securities companies established bringing the total to 13 or half the number of listed firms. The total chartered capital of all securities firms stands at 605.75 billion dong, an increase of 82.75 billion dong against 2003. Many branches of securities companies were expanded facilitating investors to access the stock market.
More foreign and local investors have started to focus interest on the stock market. To date there are 20,347 registered stock trading accounts at securities companies, up 23% against 2003,of which 207 accounts belong to institutional investors. The number of accounts owned by foreign investors is 197. Securities investment funds including Dragon Capital, Phanxipan [Fansipan], Vietnam Opportunities Fund and Arisaig are active or about become active in the stock market. So far, foreign investors have hold nearly 30% of shares of 11 listed companies. Total transaction value of foreign investors has reached nearly one trillion dong. Most are long-term investors and their involvement has made a positive impact on the stock market, contributing to stability and higher liquidity.
The issuance and listing of government bonds performed much better in 2004. HCM City Securities transaction Centre opened 36 bidding sessions for government bonds with combined bid winning values reaching nearly 2.158 trillion dong, of which 1.2707 trillion dong was issued by the State Treasury and 762 billion dong by the Development Assistance Fund (DAF). The stock market currently lists 199 kinds of bonds, with a total volume of 229.325 million worth 23 trillion dong. One of the major factors leading an increase in bond trades was adoption of a new bidding mechanism, under which bonds are offered at a price either higher or lower than their face value.
In 2005, the SCC said it plans to start operations of the Hanoi Securities Trading Centre and license large-scale companies to list on the bourse, auction shares of equitising SOEs and upgrade HCM City Securities Trading Centre to become a more formal stock exchange