[table]


The idea about the establishment of the stock stabilising
fund, which would allow for intervention in the stock market when
necessary, was raised at a recent meeting between the State Securities
Commission and investment funds and securities firms in HCM City. However, it seems it wouldn’t be easy to turn the idea into reality.[/i]

n
fact, the idea was once mentioned by the Vietnam Association of
Securities Business (VASB). The association found out that such a stock
stabilising fund existed in the first period of the stock markets in South Korea, Taiwan and Hong Kong, and effectively helped stabilise those markets in difficult periods.





In
principle, the fund could be used to intervene in the market if it fell
continuously, thus helping restore investors’ confidence.





Nevertheless, Nguyen Thanh Ky, Secretary General of VASB, said that it would not be easy to set up such a fund in Vietnam.
In the current conditions, the market’s members would have to make
financial contributions to the fund in cash, not in bonds or shares.
Moreover, it would be necessary to set up a specific mechanism for the
fund’s operation, which clearly stipulated the function and
responsibility of the management board and the profit dividing scheme.





Ky
also mentioned another difficulty which could make the stock
stabilising fund unfeasible. In other economies, speculation and
activities to sway share prices rarely occur, while these are really a
problem in Vietnam. The stock stabilising fund might not have positive effects on a market with problems and shortcomings.





Regarding
the financial contribution scheme, Ky said that there are now 300
listed companies, more than 100 securities firms and investment fund
management companies, which would have to make financial contributions
to the fund. Moreover, the Government might consider using a part of
the capital surplus it gets in the equitisation process to contribute
to the fund. A part of the tax sums paid by securities investors could
also be contributed to the fund.





Experts
still have doubts about the feasibility of the stock stabilising fund,
saying that such a fund would be just like the State Capital Investment
Corporation (SCIC). The state’s powerful corporation stated several
months ago it had joined the stock market to rescue the falling market.
However, the corporation’s intervention has not been successful.





However,
Ky does not think that the stock stabilising fund would act like SCIC.
SCIC, as the state capital investment unit, has a lot of other
important functions besides regulating the stock market. Meanwhile, the
stock stabilising fund, once operational, would have only the function
of supporting and stabilising the stock market.





In fact, SSC has been researching a suitable stock stabilising fund for Vietnam.
The biggest challenge for SSC would be to set up regulations to manage
the fund as a professional institution. It would also be necessary to
keep strict control over the stock market in order to prevent
activities of swaying securities prices.





And
more importantly, the fund would need to be financially well-off to be
operational. Meanwhile, the members of the market are incurring losses,
and they have to manage somehow to survive the current difficult
period, rather than thinking of making financial contributions to the
stock stabilising fund.






[/table]