The State Securities Commission (SSC) held a series of meetings with the State Bank of Vietnam (SBV) and the Ministry of Finance to discuss how to stimulate the stock market in 2008.

Loosening control over securities lending and accelerating IPOs of State-owned corporations were the two measures suggested by SSC. Most notably, Decision 03, which says that commercial banks’ securities loans must exceed 3% of total outstanding loans, will be amended and replaced by another risk management scheme.

Nguyen Son, Deputy Head of the Market Development Department under the SSC, talked about how the Decision 03 amendment will be carried out.

You said the central bank will develop a new plan to safely manage securities lending. Could you please elaborate on that?

Statistics show banks’ current securities lending ratio is not as high as previously thought. Very few banks’ securities loans are over 3% of total outstanding loans.

As far as I know, the State Bank of Vietnam is considering a new plan on reducing the risks of securities debts, under which no single fixed ratio of securities loans will be imposed. Different banks will have different control levels. The central bank may stipulate requirements on provisional funds; meaning commercial banks can lend to securities investors, but they must have provisional funds to manage risks.

Accordingly, banks can lend at a ratio commensurate with safety criteria and available provisional funds.

The SSC mentioned measures to improve supply and stimulate demand. Could you please provide us with further details about those measures, especially those aimed at attracting more foreign capital?

The Ministry of Finance is considering buying up the foreign currencies now being held by commercial banks to increase the VND supply that can be used towards securities investments.

Regarding the foreign ownership ratio in listed companies, for the time being, the cap will remain at 49% of total chartered capital. However, the Ministry of Finance is seeking the Government’s permission to raise the foreign ownership ratio in OTC market items to 49% from 30%.

Moreover, the Ministry of Finance will also submit to the Government the plan to allow the establishment of 100% foreign owned investment fund management companies and branches of foreign owned management companies in Vietnam earlier than the WTO deadline.

Experts have expressed concerns about the oversupply of securities. Will theSSC suggest any solutions to this problem?

The Government has asked the Ministry of Finance to find out a suitable IPO roadmap in order to balance the supply and demand. Sabeco’s IPO is expected to lure a huge volume of capital, estimated at VND10tril, which will certainly have a big impact on the total demand.

The Government has agreed to delay the implementation of the Capital Gains Tax – seriously affecting securities profits and transactions. What will this mean?

Securities investors will not have to pay personal income tax for their earnings in 2008. They will have to pay this tax as of January 1, 2009.

Why do the SSC and the Ministry of Finance think it is necessary to take measures to stimulate market demand?

The VN Index has been below 900 points since the beginning of the year, and trade volume has been dramatically decreasing. The low demand and superfluous supply have been cited as the reasons behind this. Decision 03 also adversely affected capital inflow to the stock market. Meanwhile, foreign capital is stuck as foreign investors cannot buy VND to make securities transactions.

Source: VietnamNet