Vietnamese stock market too small for the big fish

Vietnamese stock market too small for the big fish

VietNamNet Bridge – Many big foreign investors came to Vietnam with heavy bags of money, but later trucked the bags back home, unable to find any satisfactory places into which to pour their cash.

An institutional investor once had hoped to disburse $100-300 million into Vietnamese stocks within one or two months, but the investor was told that the market here did not have enough “goods” to sell, according Le Anh Tuan, Chief Economist of Dragon Capital.

With the current ceiling on foreign ownership ratio set at 49 percent, the total value of shares foreign investors can buy in the Vietnamese stock market is about $6 billion. But if only considering the shares of the companies which can satisfy the capitalization value and liquidity requirements to be listed in the VN30 group, the figure would be $3.1 billion at maximum.

Anh commented that Vietnam is in dire need of capital, but it cannot attract big investors, because those investors only target markets big enough to be worth their investments.

According to Tran Dac Sinh, Chair of the HCM City Stock Exchange (HOSE), in 2013, the value of foreign investors’ transactions amounted to 16 percent of the total trading value of the market, which was much lower than the 25 percent in 2008 and 30 percent in the years before.

In 2008-2013, the number of foreign investors’ accounts only comprised 1-2 percent of the total accounts opened, but the investors’ transaction value accounted for a full 15-18 percent of the total trading value. In general, foreigners bought more than sold which, in the eyes of the watchdog agency, demonstrated foreign investors’ clear interest in the Vietnamese market.

Following the hot development period of 2006-2007, the foreign capital flow into the stock market slowed down, because the Vietnamese market remains too small and cannot “absorb” much capital.

Also according to Sinh, the total capitalization value of both the Hanoi and HCM City bourses is just about $45 billion, far lower than the other regional markets like Thailand ($460 billion), Indonesia ($427 billion) and the Philippines ($186 billion).

Meanwhile, the biggest Vietnamese corporations have capitalization values of no higher than $5 billion, far lower than the regional average level of $30 billion.

Eight companies listing their shares at HOSE have capitalization value higher than $1 billion. Meanwhile, there are 8 such companies in Thailand.

The small scale of the stock market and the limitation in the foreign ownership ratio make Vietnamese stocks insufficiently attractive in the eyes of foreign investors. With the foreign ownership ratio of 24 percent at present, there is not much more room for foreign investors.

Analysts said in general, foreign investors only eye the large stock markets with daily trading values of $1 billion at minimum. Meanwhile, only VND1 trillion worth of stocks, or $50 million, is traded daily in Vietnam.

Only two companies of the VN30 group (the group of companies with the biggest capitalization values) have average trading values of over $2 million a day, and 13 companies have trading values of $1-2 million.

TBKTSG

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