Even the most optimistic investors could not have imagined that the market would bounce back so powerfully within 60 days, while the VN Index once fell down to below 900 pints. The heated up stock market has attracted huge capital from various sources.

Money from East Europe…

The State Bank of Vietnam affirms that commercial banks’ loans for securities investments have increased, but not considerably.

Most of the lenders are state-owned banks which have outstanding loans for securities investments below 3% of total outstanding loans. However, the central bank has found out that the banks do not focus on funding securities investment because these are small deals, which cannot bring high profit as the wholesale deals on funding enterprises’ projects can.

Moreover, in order to avoid risks, state-owned banks only lend clients the sums of money 1.5-2 times higher than the face value of mortgaged shares, which means that the loans are not big. High interest rates have also kept investors away from state bank loans.

As such, the money which has been pumped into securities investment deals has not come from banks.

Meanwhile, bankers believe that the cash flowing into the bourse originates from overseas remittance, which always sees increases in the fourth quarter.

Additionally, analysts say that money is now flowing from the gold market, where a lot of gold speculators can gain profit from the price increases. The gold price is now staying firm at a high level, which means that gold speculators do not have many opportunities with gold any more, and they have decided to inject money in stocks.

The money flowing into the stock market is also coming from investment groups. Some 10 investment groups of Vietnamese businessmen in East Europe have been set up under the form of Vietnamese limited companies in the last three months. The investment capital of several groups reaches several thousands of billion dong.

The representative of one of the groups said that Vietnamese investors in East Europe witnessed the sharp increases of shares in the countries where they are doing business last decade, and they hope to see similar growth in Vietnam.

These groups are seeking a way to make investment in Vietnamese stocks. As for them, it is not too late to buy shares in Vietnam now. Meanwhile, it is not so favourable any more to do business now in East Europe, especially in Russia.

… and from other foreign sources

In September 2007, the securities investors’ circle witnessed the biggest assignment deal between foreign investors: VOF transferred 3.2mil shares of Can Don Hydropower Plant (SJD) to Vietnam Infrastructure Fund. Both funds are being managed by VinaCapital.

VOF bought 6.38mil SJD last year (24.5%) at $15.31mil. The fund sold half of SJD to the infrastructure fund, because this was a newly set up fund that needs disbursement.

Meanwhile, VOF wants to restructure its investment portfolio. SJD can bring stable profit, but the investment efficiency it can bring is the lowest among VOF’s top 10 share items.

The assignment deal is proof of the pressure on foreign investment funds to disburse money at this time.

However, despite the pressure for disbursement, foreign investors will not buy shares at any cost.

In the report “Greed and Fear” released by Hong Kong-based CLSA, a financial consultancy firm under BNP Paribas, CLSA advised investors to keep cautious with their investment deals.

With the recent price increases, the P/E index of blue chips has come back to 25. As for the IPOs of big corporations, a question has been raised about whether or not foreign investors can buy shares through public auctions.

The latest unverified news says that foreign investors cannot participate in the auction of 6.5% of Vietcombank’s shares to the public.

Currently, those foreign investors who cannot make direct securities transactions in Vietnam are making investments through other foreign institutions which have investments in Vietnam.

According to CLSA, 41 listing Taiwanese companies are investing in CLSA’s Taiwan Vietnam Index, which has investment in the shares of the five leading companies listed at the HCM City Stock Exchange.

Other foreign institutions belonging to well-known groups like Citigroup, Deutsche Bank and Merrill Lynch have also sold investment certificates to foreign investors outside Vietnam. If foreign investors ask these institutions to buy Vietnamese shares for them, they would have to pay 2% of total transaction value. Vietnamese management authorities still cannot control capital from this source.

Source: TBKTSG.