Vietnam's capital market to represent half of GDP in 2010

The stock market would be the main channel through which long term capital would be brought into Vietnam, according to a finance ministry plan to develop the national economy between now and 2020. Under the plan approved by Prime Minister Nguyen Tan Dung earlier this month Vietnam’s stock market capitalization is set to account for 70 percent of the country’s gross domestic product (GDP) by 2020. Between now and 2010, all of the major state companies, including large commercial banks, would list their shares on the stock market, which would account for 50 percent of the GDP, according to the Ministry of Finance.

The first half saw a total value of VND60 trillion (US$3.8 million) raised by both share and bond issues at the Ho Chi Minh City and Hanoi markets. The figure made up about 6 percent of national GDP for the period. Over the first six months, 66 companies issued over VND1.4 billion shares at face value to raise over VND30 trillion ($1.88 billion). The market also saw the sale of VND82 trillion worth of government, urban and corporate bonds, equaling to 8.3 percent of the country’s GDP last year.

Total stock market capitalization had reached VND280 trillion ($17.5 billion) by late July, up 25 percent year-on-year. Market capitalization for the first half of this year alone has made up 28.8 percent of 2006’s total national GDP. The HCMC market is home to 112 listed stocks, including two funds, while the Hanoi exchange has 87 firms trading shares.

The ministry’s development strategy gives top priority to adapting stock market structure and operations to international norms and integrating Vietnam’s exchanges with regional and international markets. While more capital must be sourced from both domestic and overseas channels, the ministry’s plan also emphasized the necessity of accelerating the equitization process. Bond diversification, including the methods of issuing government bonds, urban bonds and corporate bonds, would be vital to achieving the country’s economic goals. Viewing the country’s bond market as too small, the ministry will establish and facilitate a market for bonds and debt instruments.

The government has approved a $1 billion sovereign bond issue this year to raise funds for some key refinery, power, and cargo ship projects. The fourth quarter issue will mature after 15 or 20 years. The finance ministry originally planned last year for a $500 million bond issue.

In October 2005, when Vietnam came out with its first dollar bond issue, the size was upped from $500 million to $750 million after building an order book of $4.5 billion. In March ratings firm Moody's upgraded its outlook for Vietnam's foreign-currency bonds to positive from stable, while Fitch Ratings assigned BB- for Vietnam's long-term foreign currency Issuer Default with a stable outlook.

Source: http://www.thanhniennews.com/business/?catid=2&newsid=30770