The State Securities Commission and the State Bank of Viet Nam are developing suitable means to control foreign investment in the stock market, a conference heard last week.

A joint circular would likely be issued within this month, according to Securities Commission deputy chairwoman Nguyen Thi Lien Hoa.

The regulation would put an end to foreign institutional investors giving mandates to individuals to invest on their behalf on the stock market, Hoa said. The practice has led to losses in tax revenues and an inability to manage investors or monitor foreign investment flows.

The regulation would also tighten rules on foreign investor registration, requiring foreign investors coming to Viet Nam to supply to authorities such specific information as who they are, where they come from, and why they want to invest in Viet Nam.

Over the past few years, foreign indirect investment flowing in the stock market has risen dramatically, but violations of reporting and disclosure rules have also increased. In a fast-moving stock market, late reporting was able to have a negative impact on investors, many of whom often watch for foreign investors movements before making investment decisions, Hoa said.

Therefore, she said, investor reponsibilty for reporting transactions to authorities would also be highlighted in the regulation.

Determining actual totals of foreign indirect investment was also a sensitive problem, said a Securities Commission official. The commission was aware of the scale of investment in Viet Nam but the amount of capital actually invested was not always equal to capital commitments.

Meanwhile, Hoa said, uncontrolled foreign indirect investment posed risks of increasing inflationary pressures and the value of the dong, with subsequent disadvantages for exports.

With foreign indirect investment of US$5 billion, the supply of foreign currency has gone up, helping the State Bank increase foreign currency reserves. However, the State Bank has to use large amounts of local currency to buy foreign currency, posing risks of increasing inflation, she explained.

Nguyen Ngoc Canh, head of the State Securities Commission’s International Co-operation Department, said that foreigners currently invested in the stock market through representative offices or individuals working in those offices, or through mandates to a brokerage.

Investments through rep offices were counter to the law that rep offices are not allowed to engage in profit-making activities.

Brokerage accounts, meanwhile, had implicit risks, Canh said.

Source:  VNAgency