Vietnam's stock market the hot new game in town
VIETNAM'S stock exchange has outpaced every other Asian bourse this year as investors in a country with a passion for betting have discovered the newest game in town-equity trading.
Eager to cash in on booming economic growth of 8.4 per cent last year, the urban middle class has fuelled nascent exchanges in Ho Chi Minh City and Hanoi, and a flourishing "grey" market of as-yet unlisted stocks.
The HCMC Securities Trading Centre, set up in the communist- ruled country in 2000, is still in its infancy, with just 37 listed companies and a market capitalisation of 1.94 billion dollars.
But it's growing rapidly: trading has exploded in a share market that was worth just 250 million dollars a year ago. So far this year, the VN Index has gained over 80 per cent, closing up 0.4 per cent at 545.39 points Friday.
Studying the numbers recently on the electronic board of a major broker, Saigon Securities Inc, was Nguyen Quoc Truong, 49, a restaurant owner who said he has invested five million dong (300 dollars) so far. Truong said he understands only the basics of stock-trading and sometimes takes advice from his teenage nephew while sticking to simple, prudent rules.
"The market goes down when many people sell, and it rises when many people buy," he said. "I choose the biggest company. It's safer."
"With a lottery ticket," he added, "you have less chance to win."
Truong is part of a new wave of rookie investors discovering the rules of capitalism in Vietnam which hopes to join the World Trade Organisation (WTO) this year. Without access to company reports or an aggressive financial press, most investors rely on rumours, friends' advice and gut-feelings.
"Most people buy and sell stocks without analysis, without caring for the company's performance and financial results," said a 31-year-old woman investor in Hanoi. "Trading stocks for them is just like gambling."
And gambling, many Vietnamese will admit, is a national obsession-whether it's on card games, buffalo fights, European football or the wildly popular and illegal "so de" game, a bet on the last two numbers of the state lottery.
So it comes as little surprise that the number of investors on the HCMC market has shot up from 20,000 in January to 50,000 today. In Ho Chi Minh City, many people now hotly debate the latest news on what state-owned enterprise will equitise next, or which bank may be targeted by a foreign giant. "Before, in coffee shops, people were talking about real estate," said Doan Viet Dai Tu, managing partner of investment and consultant group Open Asia. "Now they talk about the stock exchange." Hoa, a 45-year-old mother of three, said, "I gamble so that I can invest in my children's studies," referring to stock trading. "I look at the Internet and take into account information gathered by my friends."
In a bid to calm the red-hot market, the finance ministry recently told state banks to tighten credit for share purchases, fearing a market downturn will lead to a wave of bad loans.
Many shares are also traded on the informal or "grey" over- the-counter market, where people put their money on whatever as- yet unlisted company is thought to be the next big thing.
Merrill Lynch fuelled the excitement in January with a bullish report on the emerging market of 83 million people, where it said "wealth is being created at a turbo-charged rate," labelling Vietnam shares a 'ten-year buy.'
Foreign investors, too, have discovered Vietnam, calmly buying low during a sudden dip last week when some local investors experienced their first market wobble.
Experts warn that share-trading holds dangers for the first- timers.
"Retail investors don't really understand the process," said Kevin Snowball, a director of investment fund PXP Vietnam Asset Management.
"The level of sophistication is ridiculously low. It's just blind trust in what other investors say."
The HCMC centre now offers classes on the basics of stock- trading-but another problem remains assessing the worth of the companies themselves.
To comply with WTO rules, Vietnam has passed new company laws that mandate greater disclosure, but so far there is little transparency, said researcher Martin Gainsborough of the Bristol- Vietnam Project. In a country where corrupt tax officials and other state agencies often prey on enterprises, companies have little incentive to open their books, he argues in a recent report.
"While the companies that have listed on the market are arguably the leaders in terms of paying attention to corporate governance," he said, "doubts still linger on... whether one can trust the information they have made available."