New circular won't affect indirect investment

 A newly-issued circular from the State Bank of Viet Nam would not affect foreign indirect investment (FII) in Viet Nam, according to experts.

The State Bank issued the Circular 05/2014/TT-NHNN on March 12. It contained guidelines on opening and using indirect investment capital accounts for implementing foreign indirect investment activities in Viet Nam.

The circular applies to foreign investors who are non-residents who want to carry out indirect investment activities in Viet Nam, as well as organisations and individuals concerned with such activities.

An indirect investment capital account is a Vietnamese dong account opened by a foreign investor at an authorised commercial bank or foreign bank branch to implement income and expenditure transactions relating to foreign indirect investment activities in Viet Nam.

All such activities have to be carried out in domestic currency. Any balance in the account cannot be transferred to a fixed-term deposit or savings account in domestic credit institutions or foreign bank branches.

Kyung Hee Oh, general director of KIS Viet Nam Securities Company, said the circular would not have much impact on indirect investment activities because most of indirect capital had fallen into stock and bond markets or other kinds of investment with high profit via investment funds. Little of the capital was put in banks as short-term deposits, reports Dau Tu (Vietnam Investment Review) newspaper.

He said the attraction of FII in Viet Nam would depend on other factors, including potential in the growth of the stock market and macro-economy, "open-door" policies and investment incentives for foreign investors.

Oh said that Viet Nam's stock market had attracted many foreign investors. The local securities market had grown impressively against other markets in the region because the Government had adopted monetary loosening policies, including promoting credit growth at commercial banks and cutting loan interest rates.

He added that during the restructuring of the banking system, financial and monetary norms at banks were improved and bad debt has reduced so those positive factors have attracted foreign investors.

A representative of Mekong Capital Fund Management Company predicted that the local stock market's growth rate could reach 10-15 per cent this year and that shares would stay reasonable, reports the newspaper. The decrease in the interest rate for deposits would make idle money move into investment channels with high interest, such as the stock market.

Oh predicted that FII would continue coming to Viet Nam because the positive factors would attract more investors.