Richmond Mayo – Smith, Managing Director of Indochina Capital, said the stock market’s inflation from a very low level is normal. The stock market in Bangkok increased five fold within a short period.

The Vietnamese stock market has expanded by two to three times over the past few months. Many people worry that this increase is virtual, or a bubble. The Ministry of Finance and the State Securities Commission have also released warnings. What do you think about this situation?

It’s true that the price of stock in the Vietnamese stock market is increasing quickly, but we must consider the context of the price increase. It is increasing from a very low level to 200%, even 300%, because the prices of stock in the market were at very low level before.

It is said that the stock prices are in a bubble, but let’s look back to the Bangkok stock market; within a short period of time it grew five fold.

I think the market hasn’t developed badly, because Vietnam is praised by foreign investors as having a lot of potential, per capita GDP is growing, and stable economic growth, especially in recent times when many foreign investors are interested in and want to invest in Vietnam. I believe that ten years later Vietnam could overcome Thailand in terms of per capita GDP.

The Vietnamese stock market, when increases so quickly, will automatically self adjust. If in the coming time the price of stock on the Vietnamese stock market reduces, or even nosedives, it will rise again. Don’t need to worry if investors want to invest long term in shares of companies in which they see potential.

What of the warnings of the Ministry of Finance and the State Securities Commission?

In 1996, the Governor of the US Federal Reserve delivered a warning when the US stock market grew excessively, but after that the market gained several more percentage points.

And when it increases to a level that it can’t exceed, the market will automatically adjust itself. Stock prices on the Vietnamese stock market are the same. The prices still increase despite the warnings of managers, and it will also self adjust when it can’t increase any more.

Another reason stock prices soar is the demand is much higher than supply. To resolve this issue, the Ministry of Finance and the State Securities Commission must seek to increase supply to restrict the fast pace of growth in the market. When supply and demand are equal, the market will surely automatically adjust.

Many people said that the Vietnamese stock market was recently rocked by the influences of some larger companies and organizations. What is your opinion about this?

I think big organizations and companies in most stock markets in the world can influence prices on the stock market of their countries, not only in Vietnam.

However, to limit this, the scale of the Vietnamese stock market needs to be quickly increased to have minimum capital of at least US$15bil so that it can develop. The Vietnamese stock market is currently too small and easy for singular organizations to control.

Apart from equitising big companies and bringing them to the bourse, the Vietnamese government should promote sales of stocks in state-owned enterprises.

Indochina Capital has worked in Vietnam for 15 years, and in that time, how much has Indochina Capital has invested and in which projects?

For the past 15 years we have invested US$1bil in real estate projects, notably the Furama Hotel in central Da Nang City, the Saigon Center in HCM City, the building at 63 Ly Thai To Street, Hanoi and many other projects.

The major activity of our group is managing the first real estate fund in Vietnam (and promoting a second), managing independent projects in the privatization and capital market, providing financial and new market infiltration consultancy services for multinational companies that want to do business in Vietnam, owning and managing an investment and brokerage bank.

Besides the real estate area, we have also invested in the Vietnamese stock market since it began to operate, and we have invested around $50mil in this market and the figure will increase in the next 12 months.

We are now managing a large sum of capital for financial organizations and foreign investors, and we own 30% of the capital of the Mekong Securities Trading Company.

Could you talk about Indochina Capital’s investment direction in the Vietnamese stock market in the future?

Compared to the real estate field, our investment in the Vietnamese bourse is still small because the scale of this market is too small now, at around $1.5bil.

However, we believe that the Vietnamese stock market will grow quickly and strongly in the time to come to reach $100bil within the next 10-12 years. At that time, we and many other companies will invest more in this market.

In the near future, how we will invest and at what level in the Vietnamese stock market, it is dependent on the market itself. Let’s see how many more kinds of shares are listed, and the speed of equitisation of state-owned enterprises.

We are interested in the equitisation process of Vietnamese companies, especially companies in the fields of telecommunications, service, infrastructure, agriculture, and seafood. If the situation develops well, we will invest in those markets.

Apart from the second real estate fund named Indochina Land Holdings 2, we will present a stock investment fund with $70-100mil this July.

Source: VNECONOMY