Only USD1bil worth of portfolio investment pumped into Vietnam: CIEM

VietNamNet Bridge – The Central Institute of Economic Management (CIEM) has denied the figure of $4bil worth of foreign portfolio investment in Vietnam which local newspapers, quoting officials, reported before. It said that only $1bil had been injected in Vietnam so far.

Investors on trading floor

Vo Tri Thanh, Director of the Department for Trade Policy and International Integration Studies under CIEM, has confirmed that only $1bil worth of portfolio investment has flown into Vietnam.

Mr Thanh said that he had been keeping an eye on portfolio investment performance and what he had seen showed that by the end of October 2006, the total capital foreign investors had injected in Vietnam reached $700mil only, but the figure might have been over $1bil by the end of 2006.

When asked to comment about the figure of $4bil worth of foreign portfolio investment reported by local newspapers before, Mr Thanh said that it could be understood that the actual initial investment capital of $1bil now had the market value of $4bil.

Mr Thanh asserted that the investment capital of $4bil was a virtual figure.

Regarding the application of policies aiming to control capital flows in the stock market, Mr Thanh said that the market did not need strong measures to control the capital sources right at this moment. He said that what the market needed now was transparency in information exposure.

Statistics showed that by the end of 2006, foreign investors had opened 1,700 accounts at banks for securities transactions. The investors, including big names like JP Morgan, Merrill Lynch and Citigroup, hold 25-30% of the total shares of listing companies.

To date, foreign investors have held the highest possible share proportion in the best listing companies (49%). It is clear that there is not much room left for investors to inject money in as the total shares they hold have nearly reached the ceiling level. 

However, foreign investors still can buy more shares through authorised nominees, which may lessen the transparency of the market, and the target to limit the foreign ownership ratio may not be fulfilled.

According to Mr Thanh, the stock market will see further development in the time to come. However, stock prices will not go up and down as dramatically as recently. State management authorities will be more cautious when regulating the market. Meanwhile, investors, who have more knowledge and experience, will not make investment decisions by feeling any more. The demand for securities will keep increasing, but supplies will also be profuse as the equitisation process associated with IPO has been pushed up. 

CIEM has released Vietnam’s economy report 2006, which predicts that Vietnam will see the GDP growth rate of 8.5% this year and the inflation rate at 7.7%.

CIEM predicts that exports will increase by 23.1% this year, and the trade gap will be at 4.3% of GDP. CIEM’s experts are optimistic about the development of the service sector, which is thought will see a growth rate higher than the GDP growth rate (the figure was 8.29% in 2006).

The investment environment will be further improved to become more attractive as Vietnam is trying to strengthen institutional reform in a bid to implement WTO commitments. The disbursement of foreign direct investment is expected to rise by 25% over last year.