Stock market popular channel for investment: Dr Nghia

Despite decreasing interest rates, bank loans are hardly accessible and stock market is still a popular channel for investment and capital mobilisation.
A conference “Stock market, prospects and challenges in the current context of macro economy” was held by Vietcombank Securities Company (VCBS) on the afternoon of October 7.

The economy has overcome the most difficult stage. Dr Le Xuan Nghia was quoted as saying at the meeting. His statement briefly concentrated on four major issues including GDP growth, inflation, foreign exchange rate and foreign currency reserves.

Accordingly, GDP in Q3 2011 is estimated to climb 6.11pct year-on-year and the year figure is forecast to hike 6pct. Remarkably, industrial production index (IIP) has seen a year-on-year increase of 6.6pct. Despite the decline at the beginning of the year, the figure made a rebound in September to 12pct after dropping to the lowest of 5.8pct in the August.

Foreign exchange rate has experience some stabilisation with that on the free market falling from 22,500 dong/US dollar to 20,600 dong/US dollar in February. June saw a 6 percent decline before slightly picking up to 21,000 dong/US dollar. Commercial banks’ official forex rates in May dropped even to below the reference rates for the first time after 37 months. The official rate in September stood at 20,850 dong/US dollar and that on the free market stayed at 21,200 dong/US dollar.

Inflation rate of 0.5pct-0.6pct in October and foreign currency reserves have experienced a rebound with the figure climbing from 3.5 weeks in Q1 this year to equal as much as seven weeks of imports in September that is anticipated to reach to 8 weeks by the end of the year.

Earlier, the World Bank recommended the safety relevant figure of 3 months of imports (12 weeks). The government affirmed the national foreign currency reserves to be raised to the equivalent of 16 weeks of imports next year at the Consultative Group (CG)’s mid-term meeting in June this year.

In addition, there has emerged a relaxing of inflation, which is evidenced by decreasing monthly CPI (1.09pct in June, 1.77pct in July, 0.93pct in August and 0.82pct in September).

The accumulative nine month CPI and inflation has increased 16.4pct and 9.26pct respectively over the early year. CPI is forecast to witness further decreases in the times to come, bringing the October’s rate down to between 0.5pct-0.6pct and the entire year’s to around 19pct.

Nghia, however, assumed the most substantial macro challenge from now on till the year end to be foreign exchange rate and gold price. What is the good news is the central bank’s strong determination to keep foreign exchange rate fluctuate around 1pct at most. Even though interest rates could experience further lowering in the times to come, difficulty in approaching bank loans would prompt businesses to mobilise capital via share issuance, which is likely to offer a golden opportunity for the stock market.

“Lending rates could be lowered to 14pct-15pct by early 2012 and 12pct-13pct by 2013 when capital inflows would head for the stock market”.

The most significant obstacle for the time being would be banking industry restructuring, abolition of bad debts, GDP enhancement by restructuring banking industry, state-owned enterprises, the stock market and technology development for productivity improvement. – SOurce: Vietbiz24.com

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