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Cablegate: Technical Problems Close Hcmc Stock Exchange

VZCZCXRO5771
OO RUEHDT RUEHPB
DE RUEHHM #0519/01 1501042
ZNR UUUUU ZZH
O P 291042Z MAY 08
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4515
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 3078
RUCPDOC/USDOC WASHDC PRIORITY 0072
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 4739

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000519

SENSITIVE
SIPDIS

STATE FOR EAP/MLS AND EEB/IFD/OMA
USAID/ANE/EAA FOR DONOVAN
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO
SINGAPORE FOR TREASURY
TREASURY FOR SCHUN
STATE PASS USTR FOR BISBEE

E.O. 12958: N/A
TAGS: ECON EFIN PGOV SOCI VM
SUBJECT: TECHNICAL PROBLEMS CLOSE HCMC STOCK EXCHANGE


HO CHI MIN 00000519 001.2 OF 002


1. (SBU) Ho Chi Minh City Stock Exchange's (HoSE) trading
system software failed on May 27, bringing weeks of falling
prices to a temporary halt. This isn't the first time the
platform has experienced problems, but the three previous
interruptions lasted just hours each. With the market trending
down and inflation on the rise, a few conspiracy theorists frame
this as an intentional break. Most HCMC financial sector
professionals, however, believe the episode is nothing more than
a timely reminder that Vietnam's financial markets still need a
lot of work before they can be considered reliable and
efficient. After close of business on May 29, the HoSE
announced the problem had been solved and trading will resume on
May 30. A major system upgrade has been scheduled for June for
some time. End summary.

Down for the Count
------------------
2. (SBU) The State Securities Commission (SSC) Market
Development Department Director General Mr. Nguyen Son told
Hanoi EconOff that HoSE trading was suspended on May 27 for
technical reasons, when technical experts from HP and
Internet.Com checked and found out that there were errors in the
operating system software. According to a senior finance
reporter who spoke with ConGen EconOff, HOSE was also conducting
technical trials that would enable securities companies to enter
remote orders from their company offices when the system failed
early on May 27. The reporter added that Thailand Stock
Exchange (TSE) experts were in town to provide technical support
to HoSE when the system went down, and have diagnosed the
software as the source of the problem. Media reports note that
technical glitches previously halted trading for several hours
in December 2006, and February and August 2007, prompting HoSE
to begin looking for a new, more reliable software system that
it intends to install by June 2008.

3. (SBU) HoSE's International Cooperation Office explained that
HoSE is modeled on the Thai Stock Exchange. HoSE receives
regular technical assistance and sub-licensed its current
software from TSE, which licenses the software from the Chicago
Stock Exchange. HoSE purchased trading system hardware from a
Thai company called Internet.Com.

Most Say Just A Case of Growing Pains
-------------------------------------
4. (SBU) On balance, the HCMC financial professionals we spoke
with were annoyed at the interruption, but consider technical
problems a risk of doing business in many countries, not just
Vietnam. Dragon Capital Director Dominic Scriven took the
exchange to task in the press, saying investors expect a stock
market to be stable and free of technical problems. One
Vietnamese securities firm director told EconOff that HoSE sends
a terrible message when it does not employ a back-up system;
this is causing HCMC investors to worry about the quality and
technology of the trading system. One trader saw the silver
lining in this cloud, noting that "at least the index didn't go
down again today."

But Conspiracy Theories Abound
------------------------------
5. (SBU) Many domestic investors need to sell, another
Vietnamese securities company told us, and every day without
trading hurts them. One local brokerage issued a report on May
28 in which they state that the quantity of unfilled sale orders
is placing the bourse out of equilibrium. Some traders believe
that HoSE made up an excuse to suspend trading given the
non-stop fall of the Vietnam index. Broader inquiries around
HCMC repeatedly tapped a deep vein of skepticism that asserts
"the government" is deliberately stalling, just waiting while
crucial political decisions are under consideration in Hanoi.

Comment
-------
6. (SBU) This episode serves to remind that Vietnam's financial
markets are still developing and have a long way to go. With
persistently high inflation and growing concern over Vietnam's
current account deficit and foreign exchange regime, investors
already on edge will worry about this latest bit of news. Any
trading interruption, no matter the cause, makes players
increasingly nervous in business that lives on accurate and
timely information. End comment.

7.(U) This cable was coordinated with Embassy Hanoi and the

HO CHI MIN 00000519 002.2 OF 002


regional financial attache.
FAIRFAX

© Scoop Media

 
 
 
 
 
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