Vietnam stocks to gain in 2011, VinaSecurities says

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Vietnam's stock market, Asia's third-worst performer in 2010, may rally this year as the government boosts share sales and modernizes trading, according to the securities unit of the country's biggest fund manager.

The benchmark VN Index "has potential" to reach 600 by the end of the year, or 21 percent above Tuesday's close, amid renewed share sales by state-owned enterprises that were delayed by the global financial crisis, VinaSecurities Joint-Stock Co. Chief Economist Alan T. Pham wrote in a report. The State Securities Commission "is planning to liberalize trading practices which would help market participants in formulating and executing their investments strategies," he wrote.

The Ho Chi Minh City Stock Exchange index sank 2 percent last year while the MSCI Asia Pacific Index climbed 14 percent. Vietnam's index has tumbled 58 percent from a record in March 2007 as concerns about accelerating inflation prompted tighter lending rules and the government devalued the dong three times since November 2009 to tackle a widening trade deficit.

Vietnam is targeting annual economic growth of 7 percent to 8 percent until the year 2020 and wants to almost triple per capita income to $3,000, outgoing Communist Party Chief Nong Duc Manh said last week in Hanoi. He was speaking at the 11th National Congress, which is held every five years to select the committee that appoints the Politburo, Vietnam's ruling body.

The party voted to allow private business owners to become members for the first time, Huynh Van Toi, a delegate from Dong Nai province, an industrial zone near Ho Chi Minh City, said by phone Wednesday.

"˜Very excited'

"When the party congress is over, new leaders will be very excited and they will want to drive strong transformation in the economy," said Dang Thanh Tam, the country's third-richest man in 2010 according to VnExpress, an online newswire.

"In 2011, the government will be drastic in restructuring state-owned enterprises and will definitely speed up" government share sales, said Tam, chairman of Kinh Bac City Development Share Holding Corp., the nation's third-largest property developer.

Vietnam Airlines Corp. will restart plans to sell shares to investors as the stock market has recovered from the global financial crisis that stymied an initial public offering planned for 2008, Chief Executive Pham Ngoc Minh said in a telephone interview Jan. 17, without giving terms of the sale. It aims to complete an IPO by the end of 2012, he said.

"˜Doi moi'

The planned public sale of the airline's shares may add to investor interest in the privatization of state-owned companies as part of a more than two-decade-old policy known as "doi moi," or renovation. Prime Minister Nguyen Tan Dung's government raised 1.89 trillion dong ($97 million) from the sale of a 3.2 percent stake in PetroVietnam Gas Corp. in November.

The regulator may amend stock market rules on margin trading, short selling and the delay in settlement after concluding a transaction, the VinaSecurities report that was released Tuesday said, without giving details.

"We have been in the process of finalizing draft measures on issuing some new trading practices to submit to the ministry of finance for approval," Nguyen Son, head of the market development at the State Securities Commission said in a phone interview Tuesday. "The final approval and the timing depend on the ministry's decision," he said.

Vietnam may allow investors to buy and sell the same stock within a trading day to boost turnover and "increase liquidity," Nguyen Doan Hung, deputy chairman of the commission, said in April 2009. Investors may also be allowed to open multiple trading accounts, he said.

Tackling inflation

The government has lagged behind nations from Thailand to Malaysia in raising rates to tackle inflation, which was at a 22-month high of 11.75 percent in December. A lending surge of 28 percent last year fueled concern of rising prices and an eventual jump in defaults.

Vietnam's "exceedingly cheap" stock market needs policies that will tame inflation and boost investor confidence to support a "sustained" rally, including higher interest rates, a more stable currency and bigger foreign exchange reserves. Adrian Cundy, head of research at VinaSecurities, said on Nov. 24. The VN Index "could easily" reach 600 in 2011, he said then.

The gauge has jumped 14 percent since then, including a 4.2 percent advance over the past five days to 497.43 at yesterday's close. Shares on the index are valued at 11.3 times estimated earnings, the third-cheapest in Asia after Pakistan and South Korea.

In local currency terms, Vietnam's stock market decline last year was the worst performance in Asia after China's Shanghai Composite Index and Japan's Nikkei 225 Stock Average.

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