Cablegate: Stock Market Opens in Ho Chi Minh City

This record is a partial extract of the original cable. The full text of the original cable is not available.

2000HOCHI01176 - UNCLASSIFIED

UNCLASSIFIED PTQ7449

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CA-02 CEA-01 CIAE-00 SMEC-00 CTME-00 INL-00 DINT-00
DOEE-00 ITCE-00 WHA-00 SRPP-00 DS-00 EAP-00 EB-00
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STR-00 USIE-00 FMP-00 R-00 PMB-00 DSCC-00 G-00
NFAT-00 SAS-00 /022W
------------------712FC2 212139Z /69
FM AMCONSUL HO CHI MINH CITY
TO SECSTATE WASHDC 3443
INFO AMEMBASSY HANOI
ASEAN COLLECTIVE
AMCONSUL HONG KONG
AMEMBASSY BEIJING
AMEMBASSY SEOUL
USCINCPAC HONOLULU HI//FPA//
JICPAC HONOLULU HI
SECDEF WASHDC
USDOC WASHDC
NSC WASHDC

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 001176

SIPDIS

STATE ALSO FOR EAP/BCLTV
UNCLASSIFIED

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SECDEF FOR OSD/ISA/EA/LSTERN

E.O. 12958: N/A
TAGS: ECON PREL VM PGOV SOCI CIVS FINREF
SUBJECT: STOCK MARKET OPENS IN HO CHI MINH CITY

REF: HCMC 1135

SUMMARY
-------
1. VIETNAM'S FIRST OFFICIAL STOCK MARKET, THE HO CHI MINH
CITY SECURITIES TRADING CENTER (STC), OPENED JULY 20 WITH
GREAT FANFARE. ALTHOUGH THE OPENING OF A SECURITIES MARKET,
ESPECIALLY SINCE IT CAME ON THE HEELS OF SIGNING THE
BILATERAL TRADE AGREEMENT, IS SIGNIFICANT AS A SYMBOL OF
CONTINUED ECONOMIC REFORM, ITS PRACTICAL IMPACT LIKELY WILL
BE NEGLIGIBLE IN THE SHORT-TERM. ONLY FOUR COMPANIES WILL
BE LISTED INITIALLY, FOREIGN PARTICIPATION IS LIMITED,
FLUCTUATION MARGINS ARE TIGHTLY CONTROLLED, AND BALANCE
SHEETS OF LISTED COMPANIES WILL REMAIN OPAQUE. END SUMMARY.

STOCK MARKET OPENS
------------------
2. THE HO CHI MINH CITY SECURITIES TRADING CENTER (STC)
OPENED JULY 20 IN AN AS-YET UNREFURBISHED 85-YEAR-OLD
BUILDING LOCATED IN THE HEART OF THE CITY. ACTING CONSUL
GENERAL JOHN ATTENDED THE OPENING, WHICH FEATURED A RIBBON-
CUTTING LED BY FORMER PRIME MINISTER AND PARTY ADVISOR VO
VAN KIET, AND AN OPENING SPEECH BY FIRST DEPUTY PRIME
MINISTER NGUYEN TAN DUNG. THE EVENT, WHICH ATTRACTED A LARGE
AUDIENCE OF LOCAL AND FOREIGN BUSINESSMEN, THE CONSULAR
UNCLASSIFIED

PAGE 03 HO CHI 01176 01 OF 02 212139Z
CORPS, AND INTERNATIONAL PRESS, TOOK PLACE AMIDST UNUSUALLY
TIGHT SECURITY, WITH SURROUNDING STREETS BLOCKED TO NORMAL
TRAFFIC.

3. DPM DUNG TOLD THE AUDIENCE THAT THE OPENING OF THE STC
DEMONSTRATED THE GVN'S "FIRM DETERMINATION TO BUILD EVER
UNIFORM MARKET COMPONENTS OF THE ECONOMY." THIS SENTIMENT
WAS ECHOED IN THE INTRODUCTORY COMMENTS BY NGUYEN DUC QUANG,
CHAIRMAN OF THE STATE SECURITIES COMMISSION, WHO NOTED THAT
THE CREATION OF THE STC WAS THE NATURAL NEXT STEP IN
ECONOMIC DEVELOPMENT FOR VIETNAM. QUANG CAUTIONED, HOWEVER,
THAT THE TWO YEARS PREPARATORY PERIOD FOR THE OPENING WAS
INADEQUATE FOR SUCH A LARGE TASK, BUT THAT THE LIMITED
OPENING WAS "AN IMPORTANT REHEARSAL FOR A MODERN AND
DEVELOPED STOCK MARKET IN THE FUTURE."

NUMEROUS CONSTRAINTS
--------------------
4. AS REPORTED IN REFTEL, THE MARKET WILL OPERATE UNDER
NUMEROUS TRADING CONSTRAINTS, NOT THE LEAST OF WHICH IS THAT
ONLY FOUR COMPANIES WILL BE LISTED INITIALLY. PRICES WILL
NOT BE PERMITTED TO FLUCTUATE MORE THAN FIVE PERCENT DAILY,
AND STRINGENT CAPS WILL BE SET ON FOREIGN OWNERSHIP.
MOREOVER, THESE CAPS DICTATE THAT IT WILL BE VIRTUALLY
IMPOSSIBLE TO MAINTAIN THE MANDATED SINGLE PRICE ON SHARES,
SINCE THEY CREATE A VIRTUAL SECOND MARKET FOR FOREIGN
INVESTORS.

OPINIONS OF FOREIGN BANKERS MIXED
-----------------------------------
5. A SEASONED AMERICAN BANKER TOLD ACG ON THE EVE OF THE
UNCLASSIFIED

PAGE 04 HO CHI 01176 01 OF 02 212139Z
OPENING THAT THE STOCK MARKET "WAS A JOKE." THIS OBSERVER
FOCUSED NOT ONLY ON THE PROBLEMS CITED ABOVE, BUT ALSO ON
THE OPAQUE NATURE OF VIETNAMESE BOOKKEEPING STANDARDS.
UNTIL TRANSPARENCY IMPROVED SIGNIFICANTLY, FOREIGN INVESTORS
WOULD LIKELY IGNORE THE STC. HOWEVER, ANOTHER AMERICAN
MERCHANT BANKER (WHO WAS DISTRIBUTING FLYERS FOR HIS
MERCHANT BANK AT THE OPENING CEREMONY) TOLD ACG THAT THE
POTENTIAL FOR THE MARKET 24 MONTHS OUT WAS SIGNIFICANT. HE
PREDICTED THAT THERE WOULD BE 150 TO 200 COMPANIES LISTED BY
THAT TIME, AND THAT INDUSTRY AND SECTORAL FUNDS, SUCH AS
HIS, WOULD BE REWARDING FOR FOREIGN INVESTORS.

COMMENT: A POSITIVE START; SUBSTANCE TO FOLLOW?
--------------------------------------------- --
6. COMING ON THE HEELS OF THE SIGNING OF THE BTA, THE
OPENING OF THE STOCK MARKET ATTRACTED SIGNIFICANT
INTERNATIONAL PRESS ATTENTION THAT CENTERED ON VIETNAM'S
TRANSFORMING ECONOMY. ALTHOUGH THE OPENING OF THE MARKET IS
SYMBOLICALLY SIGNIFICANT, REGULATORY RESTRICTIONS AND
CORPORATE PRACTICES INDICATE THAT THE MARKET WILL HAVE
MINIMAL IMPACT ON THE VIETNAMESE ECONOMY IN THE NEAR FUTURE.
VIETNAM WILL HAVE TO WORK HARD ON SUPERVISING THE NEW
MARKET. IF THE NEW MARKET CAN CAPTURE SOME OF THE INFORMAL
TRADING ACTIVITY THAT HAS ALREADY BEEN TAKING PLACE, ALL THE
BETTER. THAT HO CHI MINH CITY IS THE VENUE FOR VIETNAM'S
FIRST STOCK MARKET IS ALSO GOOD. DESPITE THE PERSISTENT
BACKWARDNESS OF ECONOMIC THEORY IN THE NORTH, HO CHI MINH
CITY'S ECONOMY IS `DE FACTO' TAKING ON MANY OF THE
CHARACTERISTICS OF MARKET ORIENTATION.

JOHN

UNCLASSIFIED

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