I usually make calls to Vietnam every weekend to monitor the economic status. This time I was suprised to find out that many friends of mine are becoming millionaires thanks to the stock market.
One of them said ‘It’s a frenzy! Put your money in!’ I do want to be rich but the question is why I should bother with the stock market in my country.Stock market is no more an economic experiment
A couple of years ago, Vietnamese people hesitated to trade in the stock market since there were few listed companies and little access to companies’ financial performance. They would rather deposit their money in the banks to earn greater profits than invest in stocks. As part of our culture, we prefer savings and dread taking risks.Things have changed. A recent report of AFP shows that Vietnam’s main stock exchange, the 7 year –old HCMC Securities Trading Centre has made a stunning growth from around $300m in early 2006 to a volume of over $16b now.
(photo by Sirifin - Flickr)
Data from the Financial Times show that the benchmark VN-Index rose nearly 145 percent in last year and so far has gained over 47 percent.
Saigon Securities Inc., the country’s largest brokerage estimates that at least 500,000 Vietnamese are now participating in the stock market and the number is increasing.AFP’s reporter describes the trading floor in the largest city in Vietnam, Hochiminh City; the place is filled with people. They can be absentee office workers, students and housewives who struggle for space in the brokerage centre with professional traders.
VnExpress, the most popular online magazine in Vietnam reports ‘These days everyone can become brokers’.Reasons behind the stock fever
Last year, Vietnam attained the robust growth rate of 8.4%, only after China, according to People, the Vietnam’s Communist Party’s biggest newspaper.
Reforms have been made in public companies allowing foreigners to hold 49% stakes as more state-owned companies are pushed to go public, asserts People.Vietnam has recently joined the World Trade Organization. On a macro-level, these are the main factors fuelling the stock market boom, says Fortune Magazine.
Other reasons stay in the market itself. Kay Johnson, Time Magazine, wrote that grey market is now dominating the current bourses in Vietnam.Until recently, unlisted companies were under no obligation to disclose financial information, investors then had to find other ways to gauge company performance or whether an investment was sound. Investing in stocks mainly relies on speculation and gut feelings, reports Vnexpress.
Many newspapers in Vietnam now even joke a vegetable street vendor might earn more money than an economics professor since her analysis is simple. Investors are willing to pay lavishly for real-time market information.Financial Times in a recent report says Vietnam's market has no licensed brokers, virtually no regulatory oversight. Trades often culminate with the exchange of cash for paper shares at a local teashop.
Boom and bust?As more people are cashing in the heating economy, the Economist warns that a possible 'bubble burst' might take place like in other Asian countries several years ago.
Last week, VN-Index bounced back from recent international jitters and a mid-week wobble to close at 1,109.76 points, up 4.15 percent for the day, according to Financial Times.
Economic experts in Vietnam speculates that the stock market's current situation will cool down in the next two years. By then, more financial policies should be imposed on the bulging market.
VnExpress says Hanoi has backed off plans to impose capital controls and fines for spreading false information and insider trading.
For me, go home and become a broker? Wait until then.
This article is taken from my article posted in www.interviewmag.co.uk
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