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SUMMARY

1. Overview of the securities market

The basic knowledge o­n the securities market

- Entities participating in the securities market

The entities participating in the securities market include from small individual investors to the large organizations, such as governments, corporations, investment funds, etc. Organizations and individuals involved in the securities market could be spited into the following groups: issuers, investors, and the organizations related to the securities market.

- Characters and nature of the securities market

Similar to any good markets, the securities market is adjusted by the supply- demand rule. Due to securities market’s nature is a place to deal in long-term value documents and the investment decisions are mainly made by expectations, the securities market’s character is that big profits always associated with high risks.

- The securities market’s functions

Firstly, the securities market is an important capital source to help companies mobilizing medium and long-term investment capital to develop their productions and businesses. This capital source has more advantages compared to that borrowed from banks which are usually short -term.

Secondly, the securities market provides favorable investment environment to the public.

Thirdly, the securities market makes securities have high liquidity.

Fourthly, the securities market helps to assess enterprises’ activities.

Fifthly, the securities market creates a favorable environment to support the government implementing macroeconomic policies.

- Relationship between the securities market and the economy

Actual experiences show that stocks’ prices and other assets are important parts of the driving forces to economic growth. For example, the rise of stocks’ prices has positive effects to the increased investment of enterprises.

Experiences o­n developing institutions for the securities market in some countries

-The US securities market

-The Thailand securities market

-The China securities market

2. Vietnam’s securities market

The achievements of Vietnam securities market from the establishment to now (1998-2007)

- By the end 2003, there were 14,000 transaction accounts opened at 12 securities companies.

- In 2004, the number of shareholding companies listed in the market reached 25 companies, contributing to total transaction values in 2004 were VND 11,887 billions.

- 2005 witnessed the securities market’s brightness. By the end of2005, there were 32 shareholding companies allowed to list at Ho Chi Minh Exchange Securities Center.

-2006 marked the dramatic rise of the listed companies.By the end of 2006, there were 193 companies listed in the securities markets in HoChiMinh city and HaNoi. Total stocks circulated in the markets increase 8 times compared to the whole previous period.

- The end of 2006 and the beginning of 2007 mark the most spectacular development in the securities market development history so far.Just o­nly in the short period, the VN-INDEX of HoChiMinh city Exchange Floor increases sharply from 511.54 points in the last day of October 2006 up to the top of1,17067 points in May 13 2007. However, after a seemingly growth short period, matching with expectations of many foreign and domestic experts, Vietnam’s securities markets entering into the period of self-adjustment.

-Assessment o­n the Vietnam securities market’s results

Although Vietnam’s securities market is in the beginning period to develop, it can be said that the results of the market in the last time are significant.

- Some problems of the current securities market

Firstly, the market scale is small;

Secondly, the average P/Eindex of the listed companies are at too high levels compared with the actual business results of the listed companies.

Thirdly, in spite of the liquidity of the securities market expressed in the stock transaction values increases rapidly in the last time, but the rate compared to the market capitalization total still is too small.

Fourthly, the equitized SOEs take a main part among the listed companies, in which the rate of stocks held by the State is relatively high.

Fifthly, Vietnam securities market is still dominated by individual investors (up to 90%) and mainly small o­nes.

Sixthly,the securities market grows too rapidly in the very short time (from by the end of 2006 so far).

Seventhly, the role of foreign invidual investors at thesecurities market needs to be promoted as an international capital source to add to the domestic o­ne. However, it’s necessary to launch a remoteeffectively monitoring mechanism to this foreign capital source.

Eighthly, many problems posed which need to be solved, such as the interference of market management agencies is too deep and direct;the management and supervising market are still weak...

Ninthly, Vietnam’s securities marketstill lacks of some important institutions such as the pension funds,...

Lastly, the capital souces flow into the securities market in the last time is very huge; it means that the amount of money kept by public still very big.

-Perspectives of the securities market in the next time

Based o­n the brightness of the securities market in the last time, it can be said that the securities market has played a significant role in the socio-economic life in Vietnam. This also means that the development prospective of Vietnam’s securities market in the long-term will be very bright.

3. Some solutions to develop and improve the effect of the Vietnam securities market

The policies to develop Vietnam’s securities market2006-2010

The development objectives of Vietnam’s securities market2006- 2010 as the following:

·Expanding an organized securities market; narrowing free markets; striving up to 2010 the organized securities market’s capitalization value total reaches to 10-15% of GDP.

·Impoving the transparency of the securities market ; applying the best practices o­n corporate governance for the public companiesand securities business agencies.

·Expanding scales and capacities of the securities business and service agencies to meet development requirements of the securities market.

·Openning the securities service market under the commited roadmap for integration ; applying the principles o­n managing securities under the recommendations of the International Organization of Securitities Commitees which are consistent with certain development period of the market.

Some measures to make the securities market really becomming long-term capital supplying source for enterprises, investors and the economy as the whole

On the macro factors:stabilizing the political and economic environment to promote the public’s investments and savings.

On the micro factors : building a complete legal framework with full and clear legal documents to regulate the securities market’s activities ; providing an effective transaction mechanism through the arrangements and operations of the Securities Exchange Centers; establishing some organizations to support the market development, such as credit rating agencies, auditing organizations, …

The measures to mitigate risks, guarantee stability and avoid big and sudden changes ot the securities market

Firstly, the governement plays a role as a person to direct information and lead the market. The government should not use administrative
measures to interfer into the securities market, but should provide to the public timely and objective information through the media to adjust the securities market’s behaviours.

Secondly, adjusting the market by relevant tools. o­ne function ofthe State Capital Investment Coporation to mobilize domestic and foreign capital sources in order to supplement business capital through issuance of corporate bonds or project bonds, or setting up of investment trust funds can be used as a tool to interfer into the securities market.

Thirdly, Guaranteeing safety for the whole system. The development of the securities market always relates closely with the other parts of the financial market, especially the banking system. Therefore, it’s necessary to tie the measures to make sure safety for the entire banking system.

Fourthly, developing and implementing the derivative tools o­n securities. These derivative tools include: options, swap and futures. However, the development of these tools requires the support of the advanced and modern technology. In the development condition for Vietnam’s securities marketat present, applying gradually the derivative tools are possible and relevant.

Source: Center for Information and Documentation - CIEM,
              VNEP, June 2007.