Reporter: What is your assessment of the development of Vietnam’s capital market, especially, the stock market in recent times?

Mr Noritaka: Vietnam has achieved an impressive growth in the stock market. Before I came to Hanoi, I was the leader of the capital market group of the World Bank in Washington. This group was designed to cover Asia, Eastern Europe, Africa and Latin America. But I must say I have never seen a market like Vietnam. It’s amazing! Particularly, for the past year, there were a large number of companies coming to the stock exchange and I think the government uses the tax and equitization process in an excellent sequence. In addition, the Vietnamese government issued a securities law more than one year ago, which came into effect January this year, and we can see this new law has enhanced the regulatory framework for the securities market. It aims to boost the development of the market. The major challenge is how the State Securities Commission (SSC) effectively enforces this law.

Reporter:  Vietnam’s stock market has seen a rapid boom, but it seems to be insecure. As an experienced financial expert, how do you evaluate the situation?

Mr Noritaka: There were signs of over-valuation of the market. My colleagues, the other financial economists at the WB and I do not look at the valuation of individual stocks but the valuation of the entire market. When the whole market started showing signs of overheating, we were a little concerned about it because any crash problem could negatively impact the economy. From that perspective, the State Bank of Vietnam (SBV), the SSC, and the WB did discuss specific measures. Afterward, the SBV and SSC introduced several measures to cool down the market. But what they did was not actually to cool down the market but to protect the banking system from the overheated market. For example, SBV has released an instruction to restrict banks’ lending against securities investment, and also the SVB started tightening the money supply because there was lots of money flowing from outside. Those measures have certainly worked to cool down the market.

The SBV and the SSC also used those measures to ensure the safety of the banking system and to protect investors. Overall, that led to cooling down the market, and it did, indeed, create some ups and downs in the market. In fact, those effects were inevitable as they were part of a necessary action.

Reporter: Could you talk about the future of the Vietnamese stock market and point out some trends of the market in the coming period?

Mr Noritaka: Vietnam’s stock market has developed rapidly and I think this market will develop much more. As you know the equitization of the largest State-owned enterprises is coming soon. So far, most small- and medium-sized enterprises (SMEs) have been equitized, and the biggest ones to come are the Bank for Foreign Trade of Vietnam (Vietcombank), the Bank for Investment and Development of Vietnam (BIDV) and other State-run corporations. When they come, the market will expand much more than now. Vietnam’s stock market definitely has great potential.

The challenge is that Vietnam needs to become stronger with databases. We can see that Vietnam has a lack of pension funds, and this is a major shortcoming at the moment. Development of pension funds is not an easy task because pension funds provide security for retired people. If we look at the institutional investment sector, there are three different sectors: insurance companies, pension funds and investment funds. Among them, only investment funds are created purely for investments. Insurance companies are designed to provide insurance, pension funds are designed to provide security for retired people. So they have to identify the need for such targets. In Vietnam, there are such needs.

Reporter: In your opinion, how is the Vietnamese capital market developing, particularly the bond market?

Mr Noritaka: The bond market is extremely important. In Vietnam, at this moment there are only government bonds. The Vietnamese stock market is contributing quite well to raising capital sources, but the stock market will not be able to generate as much money as the banking system. Even compared with the bond market it will be small. However, when companies issue bonds, somebody must buy, but who is that somebody? Banks can buy them, particularly government bonds because they are very safe. But for corporate bonds, there have to be institutional investors, insurance companies and pension funds. So if the bond market wants to develop, it has to be hand in hand with developed institution databases. That’s how we want to support Vietnam’s government in years to come.

Reporter:  Thank you.