It’s necessary to filter foreign portfolio investment: officials (21/03)

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It’s necessary to filter foreign portfolio investment: officials (21/03)

Responding to the violent criticism about the strict measures to be applied to control the foreign capital flow, state management authorities affirmed that it was necessary to filter the capital flow into the market. Investors once breathed a sigh of relief when the Government announced it would not apply measures to control foreign portfolio investment flow in the stock market. However, the market has become stirred up again by the news that the Government will enact the regulation of monitoring securities companies, investment funds and fund management companies through many restrictions. The draft regulation has been facing strong opposition from the Vietnam Association of Financial Investors (VAFI), which said that 80% of investment funds would withdraw from Vietnam if the draft regulation was enacted. Phung Khac Ke, Deputy Governor of the State Bank of Vietnam (SBV), said that every country applies certain technical barriers to monitor the market and make it develop on the right track or the way the Government wants. Every country wants to seek prestigious and capable investors, which can ensure the sustainable growth of the market. “These are technical barriers, not policy barriers,” Mr Ke stressed. When asked if the majority of the investment funds would withdraw from the market, Mr Ke said that the regulation, if enacted, would not be retroactive, which means that the operational funds that cannot meet the new regulations would still be allowed to operate in Vietnam. “Only the investment funds to be set up after the regulation is enacted would have to meet the requirements. I think that the State Securities Commission (SSC) also thinks this way,” Mr Ke said. He added that the principle of non-retroactive effect would be suitable in this case, as investors have come to Vietnam in the early days of the stock market. Truong Van Phuoc, Director of the State Bank of Vietnam’s Transaction Centre, said that the question that policy makers always raise when compiling regulations is which goals the policies aim to. “If Vietnam wants to attract stable capital flow which can serve long-term development, it must have a suitable mechanism to filter capital. We have to, as Vietnamese people always say, pick our company,” Mr Phuoc said. However, Mr Phuoc said that state management authorities should consider carefully the measures to be applied, adding that administrative orders sometimes do not bring the desired effects. “The market should be controlled by economic measures rather than administrative orders,” he said. Source: VietnamNet