Vietnam stock market growth in 2011 depends on FX and inflation, SMES says
SME Securities JSC (SMES) has said that the positive outlook of the stock market in 2011 hinges on two main problems: the exchange rate and inflation.

According to SMES, if the exchange rate is just stable (not necessarily go down) along with inflation controlled, the VN Index has the ability to completely re-conquest of the threshold of approximately 550 points in 2010.

The analysts of SMES said, the current market does not lack capital. The direction of cash flow in 2011 will depend on many factors.

First, given the correlation amongst investment channels, mainly gold, foreign currencies and real estate, if the growth of the stock market is profitable enough, which will appeal to attract investors, the possibility of cash flow attraction is still large. Because the three channels of investment, gold and foreign currency for the two most unpredictable markets due to depending on the objective factor; that is the world economy. If gold and foreign exchange stability, cash flow will favour the stock market and real estate, including the stock market and property market are always linked together.

Second is the high possibility to attract the hot money of Vietnam after the failure in 2010 as many big investment funds like Dragon Capital, VinaCapital, Mekong Capital and others have all confirmed plans to add new funds in 2011. If realised, the money flow from foreigners is likely to impact positively on the market.

Third, investor confidence in macroeconomic policies, in particular from the State Bank of Vietnam and State Securities Commission with the stabilisation policies and more specific market development roadmap, especially more tools added to the market and investors.

In 2010, credit growth far exceeded the actual figure of 25 percent. In 2011, credit growth target was announced late December 2010 by SBV was about 23 percent, and the total means of payment will be in the range of 20-24 percent. This is still a very high figure compared to other economies in the region.

Therefore, cash flow will not be identified as a major problem of the stock market in 2011 if considered merely in volume. In terms of the perspective of monetary policy, many experts expressed the more optimistic view about the possibility of VN Index growth in 2011 compared to 2010 although the opportunity may not appear immediately in the first months of this year. – Lao dong