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Vietnamese stock market to debut

Fledgling bourse is a huge step for the communist nation

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HANOI, Vietnam — When Vietnam's first post-war stock market makes its debut this week, it plans to offer up government bonds as well as equity shares in its listed companies — all two of them.

A fledgling bourse it may be, but it marks a huge step forward in the communist country's drive to embrace economic reform, mobilize capital, and encourage privatization, say investors and analysts.

Coupled with last week's signing of a trade pact with the United States, the opening of the first stock trading center on Thursday signals Vietnam's determination to continue its path of economic liberalization.

"It looks like an extremely modest start. That's not only understandable, but acceptable at this point. The greater significance is that it represents nothing short of a paradigm shift for the country and its financial system," said John Shrimpton, director of direct investment firm Dragon Capital.

Vietnam has been planning a stock exchange since the early 1990s but postponed a launch for years because of a lack of companies willing to list and concerns the market would expose Vietnam's financial system to unnecessary risk.

The Asian crisis further rattled the country's conservative leadership, who believed the problems were created by exposure to foreign investment and capital. Plans for a stock market in 1998 were put on hold as the ruling Communist Party debated the merits of a capital market.

But sputtering economic growth and a drastic decline in foreign investment convinced Vietnam's leaders that bold steps were needed, say analysts. It may be years before the stock market truly takes off, but in the meantime, it serves to boost investor confidence in reform efforts and renew international interest.

"There is a consensus that this is something that needed to be done and would be good for the economy," said Fred Burke, an attorney at Baker & McKenzie who has advised the government on regulatory laws. "They're moving forward at last."

Housed in a turn-of-the-century French colonial complex in the country's economic hub of Ho Chi Minh City, the stock trading center will initially operate only three days a week. Trading activity should be extremely light.

Ho Chi Minh City-based Refrigeration Electrical Engineering (REE) and the Cables and Telecommunications Materials (SACOM) joint-stock company in neighboring Dong Nai province are the first companies licensed to list their shares. The State Securities Commission is expected to approve a handful more within months. However, the main source of commodities for the exchange floor will be government bonds, bank bonds and project bonds.

Although stock exchange operations are not perfected, Vietnamese officials are acknowledging that waiting any longer could hurt the domestic economy.

"It may be small, but if we don't do it now, it will be too late," said Tran Cao Nguyen, the SSC's director of the Securities Market Development Department. "Many local companies have been badly in need of long-term capital for years."