Sluggish reforms discourage investors

Sluggish reforms discourage investors

Investment funds are leaving the Vietnamese stock market despite falling share prices, VinaCapital chairman Terence Mahony told the Lao Dong (Labour) publication.

Cash would only pour back into the market when fund managers believed authorities had implemented strict measures to handle bad debt and equitise state-owned enterprises (SOEs), Mahony said.

Many institutional investors have forsaken the market. Late last month, SSI Vision Fund – with charter capital of VND1.7 trillion (US$80.9 million) – announced an end to its five years of operation, and VietCapital Fund will dissolve this month.

The funds that remain have had to narrow the scope of their investment activities. One fund belonging to VinaCapital did not approve a single new investment last month, saying any cash surplus would be returned to shareholders.

Dragon Capital also seemed to take more caution in its investments. Dragon Capital's Vietnam Grow Fund increased the percentage of cash in its portfolio to 3.8 per cent on October 31, compared to 2.3 per cent in August. Meanwhile, the asset value of Dragon Capital's Vietnam Enterprise Investments Limited fund dropped about $25 million in three months to $373 million.

Although share prices did not fall sharply during this period, investors were not particularly motivated to pour money into the market given the continuation of what Mahony called "core problems": bad debts and the lack of reformed SOEs.

In a recent report by Saigon Securities Inc (SSI) on December's market strategy, the company's analysts said no new information had been released about the national asset management corporation, which the Government says will settle bad debts.

And at the Viet Nam Business Forum held last week, the working group on capital markets said SOE equitisation had not made progress either.

The country needed a new roadmap with clear criteria and a detailed timetable, the group said. Investors were also worried that, core economic issues aside, the watchdogs had not even come up with immediate solutions to help increase liquidity.

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