The Government confirmed on Jan. 9 that no capital gains tax on securities trading will be implemented prior to the January 1, 2009, effective date of the new Law on Personal Income Tax.

The announcement was widely seen as intended to boost investor morale on the sagging stock market.

“It’s actually good news for investors. However, when the income tax law takes effect next year, stock investors will obviously have to pay tax under the law,” said Nguyen Son, director of market development under the State Securities Commission.

Commission chairman Vu Bang said, “We are trying to inspire the trading on the market since the market has been so gloomy, with an imbalance between supply and demand, and investors inactive.” He noted that the commission had proposed additional measures to the Government to help balance supply and demand on the stock market.

He refused to give further information about these measures, saying he hoped that would be implemented soon.

Nguyen Minh Ngoc, assistant manager of the brokerage department of Kim Long Securities Co, said January 9’s announcement was unlikely to have a prolonged impact.

“It could help boost trading for a short time, but its actual impact on the overall market imbalance is small,” Ngoc said. “The most important thing that the Government needs to do right now is to lift the limits on foreign ownership, or loosen the restrictions on lending against securities collateral under Directive No. 3.”

Son doubted whether lifting the foreign ownership cap further was feasible.

“The cap for foreign ownership in most enterprises is already 49 percent, and for commercial banks 30 percent. It is difficult to say that foreign investors bumping up against these ceilings are the cause for weak demand on the stock market,” said Son.

Underlying causes for market doldrums could include the high amount of US dollars circulating in the domestic economy. Suggested measures to counteract this phenomenon have included requiring foreign investors to pay for shares in dollars, but implementing such a requirement would likely prove problematic.

The State Securities Commission has also proposed that the Ministry of Finance spread out planned IPOs this year and next in order to trim over-supply on the market, Bang said.

“It’s another measure that the commission actually hopes could help balance the market as soon as possible,” Bang said, noting that the number of listing enterprises was enormous and a large number of IPOs happening during the year could cause deep imbalances.

The commission has also proposed measures to reduce additional share issues by already-listed companies and was devising policies to encourage overseas funds to invest more in the stock market.

“We will do everything we can to make the market develop more in 2008,” Son pledged, noting that the commission would open a conference on January 20 on how to spur trading.

“Although proposals are only on paper, they demonstrate the effort by officials to develop the market and ease the worries of investors over future development of the market,” said Dao Van Khanh, an analyst with Agribank Securities Co.

Source: VNAgency.