- Green Growth
- Your Consultant
The Ministry of Finance reported a more stable financial market in 2013, what are your thoughts on this analysis?
Looking back on the performance of the government bond market, securities and insurance last year, I think the Ministry of Finance’s appraisal is sound.
Stock market transaction value averaged VND2.578 trillion ($122 million) per session last year, up 31 per cent against 2012 with market capitalisation reaching VND964 trillion ($46 billion), rising VND199 trillion against 2012. Notably, outbound capital sources rose 54 per cent with foreign portfolio values jumping $3.8 billion against the end of the previous year. Total capital raised by the stock market surged 25 per cent against 2012.
These figures made Vietnam’s stock market one of the top performers in Asia in 2013, according to Euro Money, laying the premise for better performance in coming years. This should be very effective in contributing to the equitisation of state-owned firms.
What about the government bond and insurance market?
The bond market was similarly viewed as one of the best performing in Asia with VND195 trillion ($9.3 billion) in issues, a 16 per cent rise on-year and not including VND100 trillion ($4.7 billion) issued for debt roll-overs. Bonds were an important source of capital for the state budget and most notably served to feed development investment requirements. Transactions in the government bond secondary market were considerably more active with market players becoming more professional and the introduction of state-of-the-art transaction methods. Concurrently, the insurance market also greatly improved. Premium revenues hit VND44.39 trillion ($2.1 billion), up 7.6 per cent against 2012. Insurance firms invested VND109 trillion ($5.2 billion) into economic development, up 21.7 per cent on-year.
This year the finance ministry envisions the issue of VND400 trillion ($19 billion) in government bonds to accelerate equitisation. Will the financial market be capable of absorbing this massive sum?
This year the National Assembly has instructed the MoF [Ministry of Finance] to issue VND100 trillion ($4.7 billion) in government bonds to serve investment needs, VND224 trillion ($10.6 billion) to offset the budget deficit and VND70 trillion ($3.3 billion) for debt roll-overs. Government bond value is expected to rise VND100 trillion against 2013. In my opinion, increasing government bond value will not have a major impact on the performance of other markets or the pace of equitisation. It is more important to ensure bond yields be managed flexibly to fine-tune monetary policy management.
Businesses issuing bonds to raise capital must be transparent in their operations, with effective risk management and corporate governance systems, viable production-trading plans and ensured repayment. If they satisfy these conditions they will charm investors when they come up with an IPO, sell bonds, or hold a stock issue to raise capital.
Since domestic sources are finite, stimulating policies and mechanisms are essential to attracting investors, right?
It is important to prop up financial market development to effectively mobilise diverse capital sources for investment development needs. The target is to turn the financial market into a major channel for capital to come into the economy in the medium and long-term. To achieve this goal we need to further improve the legal system governing the financial market and related services; take drastic measures to spur SOE equitisation, particularly SOE stake auctions; and provide quality products.