Study On The Financial Market In Vietnam Finance Essay

Introduction

Fiscal Market of Vietnam depends on the Capital Markets under the operation of two companies, Hanoi Securities Trading Center and Stock Trading Center of Vietnam. The Capital Market consists of Stock Markets and Bond Markets.

Vietnam Financial Market is keeping two chief fiscal establishments: Hanoi Securities Trading Center ( Hanoi STC ) and Stock Trading Center of Vietnam ( STC ) .

In 2000, the Stock Trading Center of Vietnam was established in Ho Chi Minh City and it ‘s besides called as the Ho Chi Minh City Securities Trading Center with the maps as an authorised organic structure of Vietnam State Securities Commission and will be responsible for oversing the stock trading operations in Vietnam.

Besides that, the Hanoi STC is located in Hanoi Capital and was incorporated in the twelvemonth 2005, five old ages after. All purchasing and selling auctions of bonds and portions will be dealt by this establishment.

The STC maps as the prescribed device for issue of authorities bonds and it besides serves as the secondary market for the bonds that have been already issued. National currency of Vietnam Dong will be the denomination of every security that is purchased or sold on the Stock Trading Center.

Vietnam Dong ( VND ) 10,000 for equities and VND 100,000 for bonds will be the standard face values.

In 1996, the State Securities Commission ( SSC ) of Vietnam was incorporated with the responsibilities and duties of developing of capital markets in Vietnam, outlining and implementing regulations and ordinances, and publishing licences to the take parting companies. The International Finance Corporation will help the blueprinting ordinances.

Under the aid of an electronic order fiting agreement, the stock trading operations of the STC are carried out. The glade and closing of minutess is done with the aid of the Bank of Investment and Development of Vietnam ( BIDV ) , which is a commercial bank owned by the province.

Stock MARKETS IN VIETNAM

Vietnam Stock Markets have grown and developed quickly and been considered as importance beginnings of funding since the constitution of the first official securities market on July 20th, 2009, with the name of Ho Chi Minh Stock Exchange Center.

In recent old ages, Vietnam with two stock exchanges, Hanoi Stock Exchange ( HNX ) in Hanoi and Ho Chi Minh Stock Exchange ( HOSE ) in Ho Chi Minh City have suffered a violent roar and flop rhythm which has undermined assurance of investors.

( HOSE ) VN-Index over the old ages

Beginning: VN-Index Chart

HNX-Index over the old ages

Beginning: HNX-Index Chart

Following the Charts above, we can see at the beginning of 2007, the VN-Index slipped from a extremum of 1,173 points to a depression of 235 points in February 2009, so it hit over 600 points in a twosome following months and declined back to 500 in November 2009. The market is estimated at $ 39 billion which is tantamount to 43 % of GDP in 2009. Presently, the VN-index corsets at the place around 434 points, which is somewhat higher compared to the regional markets.

There are 191 companies listed on HOSE and 246 companies listed on HNX severally with the biggest sectors are financials that histories for about 43 % of the market size with a capitalisation of $ 16.7 billion. Besides that, consumer goods account for 8 % of the market with $ 3.3 billion, industrials claim about 9 % of the market with $ 3.4 billion in stock, and the stuffs take approximately 7 % of the market with $ 2.8 billion. ( Beginning: State Securities Commission )

The current market is dominated by single investors that create a high degree of short-run and bad trading. While, there are around 10,000 foreign investor histories on the market, and about 1.000 from institutional investors. They accounted for 20 % of the market size with a combined portfolio value of $ 7.6 billion. Approximately 20 companies are traded on the market of unlisted public companies ( UPCOM ) , while an extra 963 companies with outside stockholders have registered with the State Securities Commission of Vietnam ( SSC ) , doing them possible campaigners for trading on UPCOM. The market ‘s high corporate administration criterions and rigorous revelation demands have discouraged many of these companies from fall ining UPCOM. In add-on, more than 3,600 other companies ‘ stocks are traded informally, without any ordinance or supervising. The comparatively little size of Vietnam ‘s stock exchanges and prevalence of informal trading illustrate the nascent province of the state ‘s stock market every bit good as its potency for growing. ( Beginning: State Securities Commission )

Chemical bond MARKET IN VIETNAM

The Vietnam Bond Market development was boosted strongly when Vietnam entered WTO in 2006. In the past few old ages, Vietnam ‘s Government bond market has contributed to the development of Vietnam ‘s stock market well. Besides the balance in the construction of the securities market created, the bond market has made singular developments and go a trade good at the choice of investors.

Vietnam ‘s Government has performed many steps affecting both primary and secondary markets. On the primary market, policies are focused on issue, macro-economy and debts. Meanwhile, on secondary market, legal corridor, substructure and market participants are paid attending to.

As the lone agent assigned to run the secondary market and organize commands of Government bonds, Hanoi Stock Exchange ( HNX ) has co-operated with organ agents in implementing steps for the development of Vietnam ‘s Government Bond Market.

There are 3 types of bond: The first 1 is Government bonds which are issued by the State Treasury and authorized issuers such as Development Bank ( policy bank ) , the 2nd 1 is Municipal bonds, issue by metropolis municipalities and provincial authoritiess, the last 1 is Corporate bonds that are issued by SOE ‘s and private endeavors.

Chemical bond Market Chart

Beginning: Dragon Capital

Most of the listed bonds are authorities bonds, with an norm of 3.5 old ages to adulthood. As the chart above, we can see the State Treasury and Vietnam Development Bank ( VDB ) accounted for 41 % and 31 % , while the Municipal and corporate bonds accounted for 5 % and 23 % . Long-run authorities bonds are auctioned on HNX, while the State Bank of Vietnam ( SBV ) auctions short-run authorities bonds. SBV typically announces new issues of authorities bonds a few yearss before the auction. In add-on, ministries and local authorities can publish undertaking bonds, which can be listed on HNX, to finance particular undertakings. Presently, the secondary market is still thin and illiquid.

The corporate bond market offers immense funding potency for Vietnamese companies. Since the beginning of the twelvemonth 2010, many corporations have successfully issued long-run bonds numbering millions of dong. Some of the noteworthy issues include Kinh Bac City Development Share Holding Corporation ‘s VND1,200 billion listing, The Corporation for Financing and Promotion Technology ‘s VND1,800 billion listing, and Hoang Anh Gia Lai Joint Stock Company ‘s VND1,450 billion listing. On November 16th 2010, Vincom Joint Stock Company, one of Vietnam ‘s largest listed belongings companies, successfully priced a $ 100 million exchangeable bond offering, stand foring the first seaward corporate bond issue by a Vietnamese company. ( Beginning: Government Bond Market )

This landmark dealing opens up a new avenue through which Vietnamese companies can raise financess in the planetary capital markets. The bonds, which are exchangeable into ordinary Vincom portions, will be the first such listing for Vietnamese securities at the Singapore Exchange. Bond issue is an attractive option for Vietnamese companies. Corporate bonds are viewed as extremely liquid and profitable investings, frequently offering attractive voucher rates and flexible conditions. Consequently, publishing corporate bonds is regarded as the most effectual manner for Vietnamese companies to pull capital under current market conditions. Despite the benefits of corporate bonds as an investing vehicle, it is hard for investors to measure corporate bonds since the state ‘s recognition evaluation system is non yet standardized.

SIMILARITY AND DIFFERENCES BETWEEN STOCK MARKET AND BOND MARKET IN VIETNAM

Decision