According to local press, finance minister Vu Van Ninh also said in a statement on Saturday on the government website that the ministry would not impose a previously planned income tax on stock investors this year.
And last week the State Capital Investment Corporation (SCIC) took what it billed as ôurgentö measures to support the stockmarket after recent declines and announced an unprecedented plan to buy back shares. It posted a message on its website saying it was: ôurgently identifying a list of investment portfolios, size and methods of the investment in compliance with the governmentÆs directive for implementationö.
The statement said the move was subject to final government approval and its website would be updated with information.
Together these measures are clearly designed to attract new investors and restore confidence among existing ones û after all, the nation is struggling with double-digit inflation and the local stockmarket has lost more than a third of its value this year after a rollercoaster ride last year.
Vietnam defines unlisted public companies as those with a registered capital of more than Vnd10 billion ($624,000) and that have more than 100 investors.
This means that foreigners will soon be able to buy a greater percentage of shares in more than 1,000 Vietnamese companies. There are currently 150 companies listed on Ho Chi Minh Stock Exchange and 130 companies on the official over-the-counter market in Hanoi, and the State Securities Commission is managing trade in shares of 850 unlisted public companies.
Foreign ownership is estimated to account for 25% of the Ho Chi Minh Stock Exchange's total market capitalisation of $18 billion, according to the SSC. In terms of what stocks foreigners buy û they can now own up to 49% of the shares in non-bank listed companies and 30% in banks.
As a result, the market on Monday recorded another day of gains with both the Ho Chi Minh Stock Exchange and the Hanoi stock exchange rising by 2.8% and 3.3% to 658 and 233 respectively. However, one trader pointed out that unlike the last couple of trading days, not all stocks rose or hit the upside limit and some actually fell or were unchanged. Many analysts reckon that once the rally loses steam, stock selection will become more important as good companies at reasonable valuation would outperform average companies at high multiples.
One trader pointed out that the increase is a minor acceleration of VietnamÆs WTO undertakings (100% foreign ownership by 2009 except some specific sectors) and what it means for OTC stocks is that foreign buying will increase for those counters where the ceiling of 30% has been reached. He added that it may not, however, have a significant impact on the market as intended because OTC trades are not publicly visible unlike those on the two centers where the indices reflect investor sentiments with volume/value and foreign/domestic participation.
Domestic retail investors, who dominate trading, have bailed out of the Ho Chi Minh City and Hanoi stockmarkets in the past month as inflation hit 15.7% in February, the highest in 12 years.
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