Case Study - Vietnam Stock Market 2010

Topics: Stock market, Stock, Stock exchange Pages: 13 (4799 words) Published: May 4, 2011
1.1. History of Vietnam Stock Market
Nowadays, Vietnam is practicing development with a need to transform the economy from the centrally planned and subsidized mechanism to the free market economy. Since its extensive economic reform 20 years ago, Vietnam has made many important changes to turn its economy into a market-oriented one, including reforming the banking system, adding more financial components, and launching its first stock market, named as Ho Chi Minh City Securities Trading Center (HSTC) on July 20, 2000.

Initially, two companies were listed, Refrigeration Electrical Engineering Joint Stock Corporation (‘REE’) and Saigon Cable and Telecommunication Material Joint Stock Company (“SACOM”). The market is closely supervised by the State Securities Commission (SSC). Established under the Vietnam Government’s Decree 75/CP dated 28 November 1996, the State Security Commission (SSC) is a securities market regulatory agency which is in charged with the mission of establishment, organizing and regulating securities and securities market operations. Before February 2004, the SSC had operated as an organ directly belonging to the Prime Minister. During this period, the SSC could not well regulate the market due to some structural weaknesses. The market’s growth by number of listed companies so far has been rather slow. In fact, at the end of 2000, merely five joint stock companies were listed, and joined by only five more in 2001. The year of 2002 was recorded as the more successful year of the STC, but just a further 10 companies to be listed.

Since 2004, SSC has become part of Vietnam’s Ministry of Finance. As of February 2004, thirteen companies have been licensed by both the State Securities Commission and HSTC. Of these, nine have capital of VND 43 billion (US$2.73 million) or more and have been licensed to conduct a full range of securities business including brokerage, advisory, fund management, proprietary trading and underwriting. On November 7, 2006, Vietnam was officially recognized by the international community as the 150th WTO member. Vietnam is Asia’s second fastest growing economy after China, and it has been forecast that Vietnam will become the world’s 17th largest economy by 2025. In 2006, the HSTC consists of 32 listed companies, with total market capitalization standing at approximately 220,000 billion VND. Besides, as reported in SSC’s most recent statistics, in 2006, there were 25,000 accounts eligible for trading. Compared to the initial number of 1,471 accounts when the market started in August 2000, the increasing is substantial.

The year 2008 was a disastrous year for Vietnam stock market. Many listed companies canceled plans to issue additional shares as a means of attracting capital in similar fear to lack of interest. According to the Ministry of Finance, only 73 State-owned enterprises were equitized in 2008, representing just over one-quarter of the year's target. Due to the 2008 financial storm and the tightened monetary policy, the stock market continued falling sharply in the first months of 2009. However, after such failure, Vietnam stock market has recovered thanked to the Government’s demand stimulus package of USD 6 billion.

Listed companies from 2000 to 2008 (Source: Ministry of Planning and Investment)

Today, there are 2 stock exchanges in Vietnam, one is in Hanoi, and the other is in Ho Chi Minh City. There are 375 companies listed at the Hanoi Stock Exchange (“HNX”) and 281 companies listed at Ho Chi Minh Stock Exchange (“HOSE”). The market capitalization is approximately VND 740,000 billion. 1.2. The legal basis for a healthy and simple securities market 5 years after the Ho Chi Minh City Securities Trading Center began its operation in 2000, the Vietnam stock market has achieved substantial first steps. However, despite all preferential policies given and 5 years in operation, the stock market could...
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