The State Bank of Vietnam (SBV) has announced that total portfolio investment in Vietnam has reached $1bil. The figure proves to coincide with the one declared by the Central Institute of Economic Management (CIEM) several days ago.
The figure about foreign portfolio investment was released by SBV at a workshop on financial liberalisation recently held in Hanoi. Domestic institutions have agreed that portfolio investment is capitalised at $1bil, while the World Bank, in its recent report, said that portfolio investment capital in Vietnam had reached $4bil.
Dr Nguyen Dai Lai, Deputy Director of the Banking Development Department under SBV, said at the workshop that Vietnam was witnessing a new wave of portfolio investment. Kicked off by the issuance of Government bonds worth $750mil one year ago on the international market, portfolio investment capital keeps flowing into Vietnam.
Currently, Vietnam allows foreign investors to make limited investment in bonds and shares of local companies: they can hold up to 49% of shares in listing companies and 30% in unlisted companies.
Most recently, the Government decided to raise the ceiling foreign ownership proportion in local joint stock banks to 30%, which is believed will pave the way for additional foreign portfolio capital to flow into Vietnam, especially into Vietnamese banks.
The current regulations on capital contribution and share buying are considered very flexible, and SBV controls the capital flow through the portfolio investment accounts in VND. However, experts have warned that once regulations on capital transfer limitation are not applied, the stock market could suffer when it falls.
According to Nguyen Thi Nhung from the Forex Management Department under SBV, with foreign investment worth $4-5bil and the VN index hovering at 1,000-1,100 points, big difficulties will arise if the stock market falls and foreign investors transfer capital abroad massively as there is no limitation on capital transfer; especially, Vietnam’s foreign exchange reserve remains modest, equivalent to only 12 weeks of imports.
Mrs Nhung has urged the following of a cautious management scheme, under which, regulations must ensure the selective absorption of capital and risk prevention while still being flexible enough to attract foreign investors.
Source: VNE
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