VINACHEM

Led by emerging markets, small – and medium-sized enterprises worldwide showed increasing confidence and demonstrated steady signs of recovery in the first half of 2010, according to the semi-annual HSBC Small Business Confidence Monitor released last week.

The report gauges the six-month outlook of SMEs on local economic growth, capital investment plans and recruitment.

It captures the views of more than 6,300 SMEs across 21 markets in Asia, the Middle East, Europe, North America and Latin America. Results were used to calculate an index ranging from 0 to 200, where 200 represents the highest confidence level.

Viet Nam remains at the top of the 21 markets surveyed with an index of 164, followed by Turkey (138), Singapore (136), the Middle East (132), mainland China (123) and India (121).

In terms of local economic growth over the next six months, the majority of the country's SMEs have a positive outlook, with an increase in the percentage of SMEs (77 per cent in 2Q 2010 vs 71 per cent in 4Q 2009) expecting growth to increase.

Only 7 per cent expect growth to slow in the next six months. Southeast Asia, which stands at 47 per cent, expects the pace of economic growth to increase, while the rate of Western Europe is 10 per cent.

Small businesses in Viet Nam place great faith in Government policy. The majority of the respondents (48 per cent) said they thought Government measures were the key driver for local economic growth.

About 70 per cent of Vietnamese SMEs say they will increase their capital expenditure in the year's second half, while the global rate is 41 per cent.

Globally, 26 per cent plan to expand their workforce, while 70 per cent will maintain their current staffing levels over the next six months. Viet Nam SMEs appear to continue to be optimistic, with 58 per cent (vs 54 per cent in 4Q 2009) planning to hire more staff.

This HSBC survey shows that the top barrier for Viet Nam SMEs doing international business has changed from "unstable financial conditions" to "concern about dealing in foreign currencies".

For those not doing international business, the top barrier or reason for not entering the international market is "the complexity of certain international markets, like tax and foreign currency controls."

When asked about the leading locations for international businesses, Viet Nam SMEs seem to be in line with the global intra-trade trend, as they put Greater China, Asia and Southeast Asia at the top.

Stock market derivatives

July 28 will mark the 10th anniversary of Viet Nam stock market's first trading session. Industry insiders are still calling for permission from authorities to diversify products and enable the use of derivatives, which would stem the loss of investors who have felt discouraged and left the market.

"Despite its 10 years in operation, Viet Nam's stock market's products are poor, and are limited to shares, bonds and fund certificates. We're trading via order matching, negotiations and with a price fluctuation band. There're neither futures nor call/put options," said Nhu Dinh Hoa, general director for Bao Viet Securities Company.

He added that diversification would increase the stock markets' attraction, increase liquidity and help investors protect themselves and make profits.

Bui Nguyen Hoan, chief representative of the State Securities Commission in HCM City, said it was not risky to have short sales (selling shares en route to traders' accounts) or to have margin deals in which brokerages buy securities for traders whose money had not yet arrived to their accounts.

He, however, noted that securities companies should selected limited customers, rather than anyone with the desire, for these two tools if they are allowed.

"They will help increase liquidity and increase trading turnover, thus stirring up the market," said Hoan.

Investors have shown a strong desire for the settlement period of T+2 (two days after a deal, cash or securities will arrive the trader' account) in place of the current T+4.

According to Hoan, this is not a matter of State policy but one of technology for the Viet Nam Depository Centre and Bank for Investment and Development of Viet Nam, the settlement institution for the stock market.

"There will be no big matter about T+2 if short sales and margin deals are used," he said.

At least one securities company did not wait for approval, advancing with a short sale service. The depository centre recently sent a warning document to PetroVietnam Securities Company for violating settlement regulations.

On July 14 it placed orders to sell 47,200 shares higher than the real volume available in their customers' acounts.

Viet Nam's Securities Law has an article on the responsibility of securities companies, which enables them to lend securities to customers so that they can sell the amount. Implementation is awaiting guidelines from the Ministry of Finance.

If investors are allowed to buy and sell shares of the same companies during the same day, it will help attract investors and enhance liquidity.

"Given the price fluctuation band of five per cent in the southern region and seven per cent in the northern stock market, sound investment decisions can generate a profit of 10 to 14 per cent in one day," said Nguyen Van Dung, CEO of Tan Viet Securities Company.

In case of a mistake in a falling-trend period, a trader will suffer, for example, in HOSE, a five per cent loss instead of 20 per cent, as a result of the T+4.

Nguyen Doan Hung, SSC's vice chairman, agreed that the market's development needed such products. However, the authority must look at the development of the market to decide the right time. "We can not be too hasty about this issue," he said.

Meanwhile, the State Bank of Viet Nam has set this year's credit growth target at 25 per cent, compared to the actual 37 per cent growth last year. This year's first half, however, managed to be only slightly over 10 per cent, leaving almost 15 per cent for the final six months.

Loans in Vietnamese dong posted a rise of only 4.6 per cent while those in foreign currencies, mostly in the US dollar, were 27 per cent. It should be noted that dollar mobilisation in the first half of the year was lower than credit growth. There are factors that have ignited concerns that the goal might be missed.

According to Le Duc Thuy, chairman of the National Financial Supervisory Committee, deposit rates are faced with other investment channels. Inflation concerns have held lending rate at high levels.

"The lending rates, around 14-16 per cent per annum, were unaffordable to many corporate and individual customers," Thuy said at a seminar last week in HCM City.

"There are banks that offer 12.5 to 13 per cent rates but require conditions in terms of amounts and service charges," he added.

Alan Pham, chief economist for VinaSecurities Company, said that businesses found the cost of a fund of 14-15 per cent unaffordable, and that many of their production projects did not have internal return rates that would be profitable at such loan rates. They are, thus, waiting for lower rates.

On their part, banks are not willing to lend when deposit rates are so close to loan rates, which has left them with an inadequate net-interest margin.

Several banks have acquired Government bonds at an interest rate equal or even lower than the mobilisation interest rates.

Thuy said there must be strong and sound measures in monetary policy to ensure liquidity for the banking system.

(Source: VNS)