Vietnamese Government Seeks To Bolster Stock Market With CGT Announcement

by Mary Swire, Tax-News.com, Hong Kong

15 January 2008

A recent move by the Vietnamese authorities to bolster the country's flagging stock market appears to have had little effect, according to reports.

The government announced last week that the implementation of a capital gains tax on the trading of securities will be delayed until the new Law on Personal Income Tax comes into force in January 2009.

Commenting on the decision in an interview with the VN Economy news service, Nguyen Son, Deputy Head of the Market Development Department under the State Securities Commission (SSC), explained that:

"The VN Index has been below 900 points since the beginning of the year, and trade volume has been dramatically decreasing. The low demand and superfluous supply have been cited as the reasons behind this. Decision 03 also adversely affected capital inflow to the stock market. Meanwhile, foreign capital is stuck as foreign investors cannot buy VND to make securities transactions."

However, a poor close to the week on the stock market seemed to suggest that the announcement had not had the desired effect, with some observers suggesting that lifting the foreign ownership cap might have a greater impact on investor sentiment.

The Vietnamese authorities also reportedly plan to amend Directive No. 3, enacted last summer, which concerns lending against securities collateral, and which has been identified as a possible contributing factor to the lacklustre market.

According to some analysts, though, the prospects for 2008 are not all doom and gloom.

According to a Viet Nam News report, in its Market Outlook Report 2008, Mekong Securities Company predicted an upturn in the second quarter of the year.

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