Dragon Capital, the largest investment fund in Vietnam, affirms that the Vietnamese stock market, which has the most expensive stock prices in Asia, will cool down when the government puts more shares on the market.

Bill Stoops, the leader of Dragon Capital’s research division, which is based in HCM City, said that the increase of supply is a reasonable measure and would be welcomed. This will "kill two birds with one stone". Dragon Capital is selling the stocks that it owns to increase its source of cash and will wait till share prices go down to buy in.

Along with the optimistic economic growth of Vietnam and its WTO membership, the country’s stock market has attracted the attention of foreign investors.

Though the VN-Index has fallen recently, it has still grown 39% in 2007, after rocketing by 145% in 2006. According to Dragon, this index was assessed at a level 36 times higher than the profit estimated for 2006, higher than China’s CSI300 index. The stock prices on the Chinese stock market were second highest in Asia last year.

The increase of VN-Index this year ranks second in Asia, behind CSI300 with 49%. However, VN-index has declined 11% compared to the record high level of 1,170.67 points of March 12, 2007.

At the Vietnam Investment Forum held in Hanoi last month, Dean van Drasek, Managing Director of LIM Advisors Consulting Company in Hong Kong, and Fiachra MacCana, Research director of VinaCapital, said that the stock market would fall by at least 30% in the upcoming months.

According to Vietcombank Securities Trading Company, 18 of 107 kinds of stocks listed at the HCM City Securities Trading Centre are valued at 50% more than their profit.

Lavin Mok, Director of the Hong Kong-based office of Tremont Reserve Fund Management Company, said: “We worry about this price appraisal. We still hesitate to join this market at this moment."

Kevin Snowball from the PXP Vietnam Fund Management Company in HCM City has decided not to pour more money into the stock market till he has new targets for investment.

“We will use our funds when we see the stock market developing rationally,” he said.

This is the common viewpoint of fund management companies in Vietnam. In a recent meeting in Hanoi, John Shrimpton, the co-founder of the Dragon Capital in 1994 with Dominic Scriven, said that the issuance of more fund certificates was the best way to help the stock market cool down.

The value of stocks listed on the HCM City Securities Trading Centre has been around US$14.8 billion compared to $500 million in late 2005. The number of listed firms has doubled in the past six months to 107. Most of them are equitised companies. The Pha Lai Thermo-power Plant, the fourth biggest company at the HCM City Securities Trading Centre, is still largely owned by the state.

Le Thi Bang Tam, former Deputy Finance Minister and Chairman of the State Capital Investment Corporation (SCIC), said that SCIC now represented state ownership in 450 companies, including 17 listed ones.

SCIC is trying to increase the number of firms that are under its management to 1,000 and bring at least an additional 20 companies to the stock market. SCIC aims to control from 100 to 200 "strategic" companies only and this could be a big opportunity for investors.

“How long will we have the suitable sources of supply through the equitisation programme. A large volume of money is waiting to run into the stock market,” said Bill Stoops.

Source: Dan tri