A series of statistics have been announced in the last
week which show that the measures taken by the government to curb
inflation have brought the desired effects. The figures have raised
hopes about the recovery of the stock market in the near future.


Some changes in investors’ “taste”


‘Painful in the short term and profitable in the long term’ is what analysts think about stock investments in Vietnam.


Spencer White, strategic advisor to Thien Viet
Securities Company, said that the current difficulties of the national
economy, including high inflation, high risks for banks, and more
expensive loans, will last for the next 12 months at least. As such,
the stock market will not see a breakthrough in the short term.


However, Mr White believes that the market is
sensitive to any economic indices and that it will see satisfactory
happenings in the second half of the year, before the national economy
recovers.


Spencer White, who was formerly Managing Director of
Merrill Lynch, a specialist in newly emerging markets, also talked
about changes in the taste of foreign investors. They have sold share
items of companies which do not operate in key business fields,
injected money in bonds, and made strategic investments in private
companies. The investors have also been pushing up M&A activities,
and eyeing the real estate market, in which projects are thirsty for
capital consequent of the tightened monetary policies.


Mr While sees the petrol price hike, which is believed
will make inflation worse, in a positive light. He said that it is
necessary to raise the petrol prices, because subsidising petrol has
been distorting the market, putting pressure on the state budget and
worsening the current account balance. The state budget had to spend
nearly $1bil in the first six months of the year to compensate
importers for losses.


The sharp petrol price increase by 31% has caused a
short-term psychological shock. However, in the long term, it will help
producers calculate the real production costs of products. Enterprises
would find it difficult to calculate the costs if the petrol price
increased step by step and regularly.


Good potential in long term


Last year, foreign portfolio investment in Vietnam was
$7.7bil, and the figure was $600mil in the first half of the year. Mr
White said that investors should only purchase the securities they know
well, and that there will be many opportunities for long-term investors.


The average P/E index of the market is now at 10-15.
However, not only shares on Vietnam’s stock market are decreasing:
securities prices in other countries have also become more attractive,
including China.


He said that policymakers should resume the daily
trading bands of 5% for the HCM City Stock Exchange and 10% for Hanoi
Securities Trading Centre in order to improve the liquidity of the
markets, and remove the limitation on foreign ownership ratio. Vietnam
should also redefine its policies on selling stakes to foreign
investors, to aim at supporting the long-term goals of enterprises
rather than collecting as much money as possible for the state.


Mr While affirmed that the current difficulties of the
national economy will not affect the long-term potentials of Vietnam.
He believes that now is the right time to begin negotiations on trade
deals.