As the economy enters a year of expected high growth, the nation is looking to foreign indirect investment as a greater source of finance, Minister of Finance Vu Van Ninh told a two-day Viet Nam Finance and Capital Markets conference which opened in Ha Noi yesterday.

Foreign investment in the stock market and in capital markets generally will play a greater role in mobilising capital for economic growth, Ninh said.

Capitalisation of Viet Nam’s stock market was equal to 22.4 per cent of GDP, estimated at $61 billion in 2006. State spending, by comparison, accounted for 40 per cent of all investment in the economy in 2006.

Deutsche Bank sees more bonds on horizon
 
Deutsche Bank yesterday said that it expected bond issues from Viet Nam to grow rapidly in 2007-08.

Michael Luk, managing director of International Capital Markets Asia at Deutsche Bank, said that, following a US$750 million issue of 10-year Government bonds 18 months ago, Viet Nam has built an excellent rapport with international investors.

"Existing bonds have performed extremely well on the secondary market," Luk said, adding that the bonds were now trading at US$107 each.

That bond issue created a pricing benchmark for Viet Nam in international debt markets, and successfully opened up Viet Nam’s capital market to foreign investors, he said.

"Appetite internationally is currently very strong for Viet Nam. [International investors] can absorb a huge number of issues from Vietnamese companies," Luk told reporters.

In November 2006, Electricity of Viet Nam (EVN) held a landmark 10-year bond issue worth VND1 trillion. Advised by Deutsche Bank, VinaCapital and EVN-affiliated An Binh Bank, it was the first Vietnamese long-term bond to be sold mostly to offshore investors, with over 75 per cent of the three-times over-subscribed issue being allocated overseas, according to the bank.

The international bond markets provide Vietnamese borrowers with a range of benefits, such as long maturity, large size, the ability to develop relationships with foreign investors, and a reduction in reliance on traditional sources of funding, Luk said.

Bond issues like EVN’s also work for many Vietnamese companies which want to borrow overseas but earn revenue in Vietnamese dong and do not want to have exposure to foreign currency.

Deutsche Bank has been in Viet Nam for 12 years. It expects the offshore bond market to be as large as $770 billion.
 
Under a recent directive from the Prime Minister, 57 major State-owned corporations and groups would be equitised between now and 2010, shares in which would provide substantial new fodder for the domestic stock market and attract foreign portfolio investors.

Leading insurance and financial group Bao Viet, for instance, accounting for 40 per cent of the domestic insurance market, was slated to go public in 2007.

Conferee comments

The Finance and Capital Markets conference, organised by the Ministry of Finance in co-operation with EuroEvents, attracted a number of speakers and participants from local and foreign financial institutions.

Omkar Shrestha, deputy country director for the Asian Development Bank, said that Viet Nam was targetting a very high rate of investment against GDP in the years to come.

The rate has steadily increased from 30 per cent during the 1990s, which was already high, to 37-38 per cent currently, and for the years to 2010 the rate was expected to rise to 40 per cent, he said.

World Bank country director Klaus Rohland stressed that authorities needed to work closely to manage money flows and minimise risks in the capital market.

Deputy Finance Minister Tran Xuan Ha said that the State Bank would join efforts with the State Securities Commission to moderate the stock market.

The Securities Law, which took effect January 1, would pave the way to expanded capital markets, reduce the scale of the unregulated market and building a separate bond market.

State Securities Commission chairman Vu Bang said that the Securities Law and its implementing decree have gone a long way to minimise administrative hurdles to listing on the market.

A company which applies for a listing would have to wait only 30 days for a listing, half the time required in previous regulations.

Trieu Quoc Viet, a financial sector specialist for the World Bank in Viet Nam, said one of the most progressive elements of the Securities Law was its provisions on public companies.

"Both in the official and the over-the-counter markets, public companies now have to comply with rules on publicity of information, good governance and audit regulations," Viet said. "Given the OTC market is risky in particular because of a lack in information, this regulation allows investors to better protect their interests."

Source: VietnamNews