China crash may spur VN stocks

Thursday, Jul 16, 2015 08:00

Employees of FPT Stock Exchange work on the market floor in Ha Noi. — VNS Photo Thai Ha
HA NOI (Biz Hub) — Most stock analysts are agreed that the current turmoil in the Chinese stock market has not had any impact on the Vietnamese market, for now.

Instead, investors are hoping that the Chinese crash will spur foreign investment in the domestic market in the near future.

Andy Ho, managing director and head of investment at VinaCapital, said the Chinese stock market was going through a major correction but the Chinese government was taking strong measures to support the market.

"At the moment, I don't see any impact on Viet Nam," Ho wrote to Vietnam News.

China's main Shanghai Composite Index has lost over 30 per cent in value since its peak in mid-June. More than US$3.2 trillion was wiped out in less than a month, which is more than the value of France's entire stock market.

On July 8, more than 1.400 Chinese companies, about half of total China's stocks, stopped trading as the market continued its roller-coaster ride.

In response, Beijing unveiled plans to lend billions of US dollars to Chinese brokerage firms to buy blue chip stocks and even allowed basic pension funds to invest in the market.

The market began to climb again on July 9. The Shanghai Composite Index is still up more than 80 per cent from mid-2014, as it had soared more than 150 per cent in the last 12 months, the best performer in the world stock markets tracked by Bloomberg.

As Chinese stocks continue to tumble, opportunities will open up to other Asian markets, including Viet Nam, some experts have said.

"We've been talking to a lot of institutional customers... They've been asking a lot about Vietnamese equities," Eric Mustin, WallachBeth Capital vice president of ETF trading solution, told CNBC.

Mustin said Viet Nam was striding towards becoming an MSCI-classified emerging market which would lead to greater foreign investment inflows. Most recently, the expansion of foreign holdings in listed companies allowed by the Government has attracted overseas investors.

On the prospects of attracting foreign capital in China, Andy Ho said it was possible. Investors are smart and money will flow to wherever it can generate good returns, he said.

"I think most foreign investors are bullish and positive about Viet Nam, especially with the signing of Decree 60 [which lifts foreign stakes in domestic listed companies]. So let us see how it is implemented, that is the key to attracting more foreign investors," Ho said.

Vu Thanh Tu, head of research division at Viet Capital Securities Co, said many investors from Hong Kong also showed their interests in Vietnamese equities.

"The heads of some Hong Kong-based investment funds have told us they are considering investments in other emerging markets including Viet Nam after divesting capital from China," Tu was quoted on the online newspaper Economy and Forecast Review.

However, not all experts share a positive outlook on the foreign investment situation.

Le Quang Tri, director of Business Department of Tri Viet Securities Co, said it was not easy to attract foreign capital from China into Viet Nam, given the small size of its economy and its relatively meagre volume of its securities market. — VNS

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