Small VN market deters large funds
Small VN market deters large funds
Viet Nam's stock market has opened the door to operation of open-end funds and exchange-traded funds – tools that are expected to help boost development of the market – but the miniscule scale of the domestic market is still viewed as unlikely to attract large-scale funds.
High tax rates on fund income – currently 25 per cent – also do not encourage foreign investors to establish investment funds in Viet Nam.
Foreign investment funds usually have an initial capital of at least US$50-100 million, an amount that they would be hard-pressed to invest on the Vietnamese market given the low liquidity of shares, said a fund manager who asked to remain anonymous.
The funds often pick up large-cap shares in which to invest, shares which satisfy their investment criteria of market capitalisation and liquidity, in addition to other criteria based on industry, earnings, profit and corporate management.
"It's difficult to find a company satisfying all of a fund's criteria, since most listed companies are small- and medium-d enterprises," he said. "Meanwhile, large companies often operate in specific industries such as banking and real estate."
While the market capitalisation of shares on the HCM City Stock Exchange is estimated at about VND628 trillion (nearly $30 billion), the average daily trading value on the exchange has only been around VND400-600 billion ($19-28.6 million) in recent days.
PV Gas (GAS), the leading stock on the southern bourse by capitalisation with its 1.9 million outstanding shares worth an estimated VND74 trillion ($3.5 billion), regularly sees only about 3.25 per cent of that total volume of shares traded freely on the exchange. The remainder are owned by the State.
In the past month, GAS shares reached an average daily volume of less than 200,000 shares, with September 14 seeing the highest volume, with 800,000 shares changing hands.
Other blue chips, including insurer Bao Viet Holdings (BVH), steelmaker Hoa Phat Group (HPG), food processor Masan Group (MSN), dairy giant Vinamilk (VNM), software producer FPT, and real estate developer VinGroup (VIC), all often witness low trading volumes.
Viet Nam now faces stiff competition from other emerging markets in the region, including Indonesia, Myanmar and Cambodia. Market analysts also worry that Viet Nam's prolonged bear market conditions will create difficulties for funds to liquidate holdings and have an impact on the attractiveness of the Vietnamese stock market to foreign investors.
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