"Overheating" remains the most common word used to describe Vietnam's stock market these days, especially after the market's management authorities recently gave different responses to warnings from foreign observers. Economist Le Dang Doanh believes there is no need to be alarmed about conflicting remarks on the market, as he shared his view with VIR’s Tuyet Anh.
Le Dang Doanh After the International Monetary Fund released its warnings regarding Vietnam's stock market, many disputed some of these warnings. Can you comment on this?
In my opinion, the recent warnings from the IMF are partly reasonable. I do not agree completely with the opinion that the IMF’s warning is wrong. They may have some controversial analysis, especially concerning the evaluation of the P/E [price to earning ] ratio, but one should not consider their warning as totally wrong. I think it is normal that different remarks exist on the market. At present, the observation and opinions from experienced experts such as the IMF and World Bank are necessary to Vietnam, more than at any other time. We should stay vigilant because we do not have much experience of the stock market.
The performance of Vietnam’s stock market has recently been covered by newspapers such as the Financial Times, Wall Street Journal and Times. This proves that it is not only the IMF that has voiced its concerns. Vietnam’s stock market is attracting international attention. One noteworthy point is the press often keep a very close watch of abnormal phenomena. They have different analysis and we should get to know their analysis as well. Of course, a stock market has price fluctuations and this should not be made tragic. Our efforts should focus on developing it further.
Is it worrisome that the market is becoming too hot?
The current supply-demand imbalance shows the market is growing too hot, especially given the high P/E ratio of some companies. It is important to seriously observe the Prime Minister’s instruction on safety measures for the stock market. First, business activities not pursuant to the Security Law as happened recently should be supervised closely. In reality, the violator may not be intentional or ill-willed. They may not intend to seek super profits or do harm to other investors but it is necessary to prevent such activities like organised insider trading as discovered at the New York stock exchange. If this activity is real, it will have a very bad impact.
Second, there should be more attention to short-term investors and investments that lead to short-term speculation. We should not pay too much attention to foreign investors as they all want to pursue long-term business in Vietnam. They do not view the stock market as having developed fully. Vietnam’s stock market is still in the initial period, aiming at gaining experiences and preparing manpower. Meanwhile, some domestic investors with short capital have operated too actively for short-term benefits. Their actions are not different from speculation.
Do you think the high growth of the stock market will only last until the year’s end?
Vietnam’s stock market will continue its high growth if there are new commodities. I think the market will maintain this growth not only until this year’s end but also beyond the end of the year. After [this] Tet, the market has performed well. The recent Dark Tuesday at Shanghai’s stock market has caused a short-term and not negative impact.
There is much possibility for stronger development of Vietnam’s stock market, depending on many factors, one of which is new public stock issuance. This work should be carried out soon and strongly to ensure the balance of the market.