The Vietnamese government will aid international investment funds to operate in the country in a bid to stabilize its growing but uncertain stock market, a senior official from the State Securities Commission said.

Nguyen Thanh Long, deputy head of the SSC’s Fund Management Department, said Vietnam’s two stock exchanges in Hanoi and Ho Chi Minh City were fragile as their daily transactions were made by major individuals who accounted for 90 percent of trading account holders.

About 750,000 stock accounts have been opened at 105 securities companies so far, with foreign institutions and individuals owning 13,000 of them, according to the Ho Chi Minh Stock Exchange (HOSE).

The individual investors benefit the market by increasing liquidity but also cause it to fluctuate in an unsustainable fashion, Long told investors from Europe, the US and Asia at a formal meeting this week.

He said Vietnam’s stock market was known for its high liquidity among Asian markets.

Long said the liquidity ratio of a listed stock in Vietnam was about 83 percent over a 12-month period while the Asian average was about 50 percent. The higher the ratio, the higher the liquidity and hence the more attractive the market.

He said the market needed institutional investors with various types of funds to stabilize trading.

To this end, he said, the commission was preparing a legal framework for open funds operating in Vietnam and would submit it to the government for consideration.

According to Long, the Vietnamese government has just licensed 21 closed funds with combined assets of US$4 billion to invest in Vietnam’s stock market.

Long said foreign investors were important as they accounted for at least 18 percent of the local market’s daily trading value, and as high as 25 percent in 2007.

Nguyen Doan Hung, the commission’s deputy head, told the gathering that the SSC would facilitate trading with new regulations that allowed investors to place both buy and sell orders in the same transaction, and open many accounts at different securities companies instead of only one as currently allowed.

Hung said these would raise the liquidity of listed shares – a foundation for open funds operating in the stock market.

“We would have to upgrade our technical infrastructure, especially at the Vietnam Securities Depository, before introducing these changes,” Hung said.

Le Nhi Nang, HOSE’s deputy general director, said the bourse was preparing a tender for new technical infrastructure worth $30 million.

He said the new infrastructure would allow faster and easier stock trading in 2010.

About 180 companies are listed on HOSE, and their market capitalization is triple that of the 224 stocks listed on the Hanoi Stock Exchange.

Vietnam’s stock market opened in 2000. By last year, its capitalization accounted for 40 percent of Vietnam’s gross domestic product. Foreign investors owned 20 percent of the shares, according to the commission.

Philippe Oddo, general partner of Oddo & Cie, said foreign investors were eyeing shares of Vietnamese businesses that had contributed to developing the national economy.

“Some foreign investors were successful in the country and we wanted to follow them to gain profits here,” Oddo said.

He said Oddo & Cie, a France-based investment bank with total assets of 16 billion euros, managed a 200 million euro fund established over three years ago and was seeking opportunities in equitization and privatization in Vietnam.