Vietnam's stock market has come far in its first 10 years

Vietnam's stock market has come far in its first 10 years HO CHI MINH CITY — The Vietnamese call it "playing stocks" or "choi chung khoan." Those who play often do so daily, trading on market rumors or the slightest bit of news. They gather at brokerage houses such as this one, Saigon Securities, on a congested corner of the city's business district, watching stock prices scroll by on a screen running the full length of the room. Sighs follow the dips in stock prices, while muted exclamations greet the price jumps, which are few and far between these days. After a volatile 2009 — stocks soared in the first half before falling in the second — theHo Chi Minh Stock Index is approaching bear territory this year, down more than 17% so far from its May 6 high. Despite the weak performance, "You can make good money," says Nguyen Bao Hoa, 32, explaining why the brokerage house has become his makeshift office for daily trading. "I trade for myself." Ten years after Vietnam's stock exchange began, it's become a symbol of what the country is trying to achieve but has yet to fully realize: a market-based economy. In this communist nation, the stock market is seen as the ultimate symbol of capitalism, because people have the freedom to choose their own financial fates, for good or bad, through their investments. The stock market has grown significantly — only two stocks were traded in the beginning, compared with 586 today on both the Ho Chi Minh Exchange and the Hanoi Exchange — and is attracting a growing number of domestic investors. It's also become a "crucial channel for companies that want to raise medium- and long-term capital," says Minh-Giang Vuong, research officer at Vietcombank Securities. Yet the exchange struggles to hold onto foreign investment. It also grapples with liquidity, partly the result of the government's tight controls as well as the growing pains of a developing market. And because the Vietnamese belong to a culture of gambling, it can be challenging to convince them of the merits of investment principles such as buy-and-hold. While "there has always been an element of gambling in stock markets everywhere, this is something that's prevalent in Asian societies," says Roberta Karmel, a Brooklyn Law School professor and a former commissioner of the U.S. Securities and Exchange Commission who published a research paper on Vietnam's stock exchange. This gambling mentality may explain why some Vietnamese refer to themselves as "playing" rather than "investing" in stocks. "Not everyone understands the market well enough to have long-term investments," says To Hai, managing director of Viet Capital Securities, a leading brokerage and investment firm in Vietnam. Before buying stocks, investors should analyze the company's financials, its business activities, history and management, says Nguyen Quang Hai, deputy manager of the brokerage department at Viet Quoc Securities in Ho Chi Minh City. But only a third of investors are doing so, he believes: "About 30% of investors, they jump in based on what other investors do, and 40% are investing on basic information." Many Vietnamese still lack the disposable income to invest. Vietnam's economy is growing rapidly, with gross domestic product expected to rise at least 6.5% in 2010. But per capita annual income remains a modest $1,010 — $84 per month — and about 12% of residents live below the poverty line, according to the United Nations and World Bank. Investors are also limited in their ability to trade securities. While the market capitalization of Vietnam's stock market totals $33.2 billion — nearly 40% of the country's GDP — only 60% of this value can be freely traded, To estimates. That's because the government continues to hold controlling stakes in big companies such as Vinamilk, Vietcombank and Baoviet Holdings, an insurance and financial services firm. Yet, as Vietnam's economy continues to grow, so will its stock market — and its pool of potential investors. In the past two years, investment accounts in Vietnam have surged to more than 900,000 from 500,000. Many more consumers own stocks through their employers but don't actively trade. To believes Vietnam's stock market remains a good investment opportunity because it's relatively inexpensive compared with some of its Asian neighbors. He predicts the Ho Chi Minh Stock Index, or the VN-Index, will recover by the end of the year as the impact of the government's recent fiscal measures becomes clearer and traders look forward to the country's elections in 2011. "The stock market is still new, but it's developed a lot," Nguyen says. "I believe if people invest, they can make profits, because the country's growing."