VietNamNet Bridge – In the context of the global financial crisis, Vietnam’s stock market should put all its faith in domestic investors, said Le Xuan Nghia, Head of SBV’s Banking Development Strategy Department.

Le Xuan Nghia, Head of the Banking Development Strategy Department under the State Bank of Vietnam

The tardiness of the US House of Representatives some days ago and the slow implementation of the bailout plan have both contributed to the discouragement of investors. Over $5 trillion has been lost over the past few weeks, which has made the $700 billion bailout plan seem very faint. The investors’ disappointment has driven the market down further into the crisis, despite the fact that many central banks in the world have been trying to pump more cash, slash interest rates and make strong commitments on deposit insurance.

Sentiment always influences the decisions of Vietnamese investors. They may leave the market for a long time when the market falls. How about US investors?

International investors, especially US ones, act in an opposite way. They run away, but they always look back to see if the stock prices bounce back. They will come back to the market as soon as they see signs of recovery. It is because 60% of American citizens have securities investments and they have experience in the field.

The VN Index dropped to 370.8 points on October 20

It seems that in Vietnam’s stock market, much depends on the happenings in the key markets in the world, especially the US market. Does this mean that Vietnam is deeply integrated into the global economy, or this is just the problem of investors’ sentiment?

All kinds of sentiment originate from reality. Investors’ sentiment reflects their expectations on the wounds of Vietnam’s national economy caused by the global financial crisis. Investors think that if the world’s financial system can recover soon, the damages on Vietnam’s economy would be smaller, and vice versa.

Besides, the stock demand also depends on the happenings in the international market, the gold and fuel prices, and the interest rates on key markets. International investors may consider choosing other investment opportunities or other investment places. Of course, financial crisis always makes the assets’ values decrease sharply. Therefore, crisis can bring the big business opportunity, and securities prove to be the important asset.

Vietnam’s stock market is still in the difficult period with the VN Index having fallen to 366 points. What do you think the Government needs to do to support the market?

The stock market is the investment place with the most risk. In some countries in the world, governments and central banks rarely interfere the markets even whey they fall or even collapse. It is because in the countries, stock investment is considered a kind of risky business, and investors should take responsibility for their investments. The Government does not have the responsibility of using the money they get from collecting tax from people to support the stock market.

Some countries, including Vietnam, are allowed to provide a limited credit to fund securities investments. The State Bank of Vietnam has set up the limit for securities loaning: the loans given to securities investors must not be higher than 20% of banks’ chartered capital. I think that this is a good provision which helps the fledgling market develop. However, the central bank needs to strictly supervise the loaning of small banks.

Many experts now keep a pessimistic viewpoint about the money flow into the stock market. What do you think about that?

It is true that the cash flow into the stock market has been limited. However, Vietnam’s stock market should not rely on foreign investors, while it should expect the inner strength.

In fact, the total money among the public proves to be very big. In the first nine months of the year, while the deposits made by institutions at banks decreased, the deposits from individuals increased sharply by 30% over the end of 2007.

People still make deposits at banks as they cannot see any other more attractive investment channels. If the stock market shows signs of recovery, while the global markets warm up, a strong flow of cash will pour into the stock market.

As far as I know, a lot of investors have got financially ready to join the market as soon as they see positive signs. The thing the Government needs to do now is to supervise the market strictly and ensure the transparency of the market in order to strengthen the confidence of investors.

Phuoc Ha