HCM CITY — With its highgrowth rate and large working-age population, Viet Nam offers a good market forthe development of mutual funds, experts say.
"Viet Nam is not onlymarked as a country with high economic growth in the world, but also a marketwith great potential investment opportunities. It has a sizable savings source,almost 36 per cent in 2004," said Tran Xuan Ha, chairman of the StateSecurities Commission at a seminar in HCM City yesterday.
The fund continuallyoffers new shares and buys existing shares back on demand and uses its capitalto invest in diversified securities of other companies.
Nguyen Huy Ban, generaldirector for Viet Nam Social Insurance, told participants at the seminar, calledBuilding a Long-Term Savings Industry and Capital Market, that around 60 percent of the country's 82 million people are between the ages of 15 and 60, agood market for funds.
The company's socialinsurance is the only one of its kind in the country. Currently around 7 millionVietnamese employees participate in the fund.
"Apart from Viet NamSocial Insurance to ensure pensions for the participants' retirement, lifeinsurance companies also offer various products to meet diversified demands ofpeople. However these companies' operations are mainly in cities and the ruralareas are almost untapped," said Ban. Eighty per cent of Vietnamese live inthe countryside.
According to AjaySrinivasan, chief executive of Prudential's Fund Management Asia, mutual fundsprovide investors with a diversified portfolio, reduced risk, professionalmanagement and high liquidity.
The funds help increasecapital available for investment in the economy and they also lead to theorderly development of growth of both equity and debt markets, he said.Institutionalisation of the market leads to better corporate governance, headded.
However, its size is stillsmall with 30 listed firms and one investment fund with a combined marketcaptalisation of about VND5.5 trillion (US$345 million), or 0.6 per cent of thecountry's GDP in 2004.
"The differencesbetween Vietnamese and international accounting standards and undemandinglisting requirements concerning information disclosure and corperate governancecould have triggered hesitation in potential institutional investors," saidSSC's chairman Ha.
He said efforts to broadenthe market size need to be aligned with moves to develop long-term investmentinstitutions to maintain supply-demand balance in the market.
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