Wall Street Journal
May 3, 2000
Coffeehouse Capitalists GatherBy ROBERT FRANK
At Vietnam's Indexx House Cafe
Staff Reporter of THE WALL STREET JOURNAL
HO CHI MINH CITY, Vietnam -- Late in the afternoon, Vietnam's market mavens are hovering around the Big Board.
"How's Bibica?" says one trader, asking about a candy company.
"Way overpriced," says another.
And the cement sector?
"Overbought," says one. "Classic bubble."
So goes another day of trading in Vietnam. But here, the exchange is a coffeehouse, the Big Board is a slab of Formica covered with handwritten prices, and the chief market maker doubles as the maitre d' and occasional dishwasher. The closest thing to an opening bell is the rooster crowing at dawn just outside the door.
Updates and Squid
Vietnam doesn't quite yet have an official stock exchange, but that hasn't stopped the country's budding young Warren Buffetts from playing the market. At the Indexx House cafe and trading center, patrons can satisfy their appetite for the free market by buying and selling shares in Vietnam's newly privatized companies.
To some, it's Vietnam's version of the buttonwood tree, the fabled tree at 68 Wall St., where businessmen in the late 1700s met to trade stocks and bonds prior to the creation of the New York Stock Exchange. Regulars stroll into Indexx House several times a day for price updates, market rumors and the occasional fried-squid platter.
Indexx House is a sign of Vietnam's conflicted attitude toward capitalism. The government has sold off, at bargain prices, shares in more than 400 companies, showering workers and the public with more than $500 million in freely tradable shares. But there is no one place to trade them.
The Communist Party has been promising a stock exchange for more than five years. After various studies and discussions, the only activity in the future stock-exchange building -- a big former Parliament hall on the Saigon River -- is a group of pigeons cooing in the rafters. Vietnam remains one of the only countries in Asia without an exchange; even tiny Bhutan has one.
While the government plans to open a "Trading Center," or miniexchange, come summer, only six companies have agreed to list their shares there. Others fear having to disclose information and are put off by all the rigmarole.
Anywhere Will Do
In the meantime, Vietnam's under-the-counter stock market has a life of its own. Traders gather in noodle shops, living rooms, bank lobbies and churches to buy and sell shares. Investment clubs have weekly meetings, and members swap company balance sheets like prized baseball cards.
There are four licensed securities businesses in Vietnam and several others seeking approval. A local publishing company recently launched a weekly magazine called Securities Investment, with articles including one titled "Hot News: Cement Transport Company to Sell Shares." Circulation is up 60%, to 8,000, since the magazine was first put out last fall.
"Of course, we'd prefer to have a stock exchange," says Tham Uyen Nguyen, a director at Bao Viet Securities, one of the securities firms. "But until then, we make our own markets."
Indexx House is at the center of the action. Opened last year by five young entrepreneurs who studied the history of stock trading in the U.S., the sunny cafe here in the former Saigon now attracts the most-avid investors. Prices on its Big Board are updated with a green Magic Marker once or twice a day, "depending on how busy the restaurant is," says manager and co-founder Pham Khanh Lynh.
Personal computers line the bar, and a "Securities Corner" offers books on finance, guides to Wall Street and a tome called "Investing in Vietnam," which the cafe helped publish. The company recently installed a high-speed electronic ticker, yet with few local prices to display, it simply repeats the slogan: "Indexx House -- Join the entrepreneurial spirit!" A TV screen upstairs shows market action in New York and Tokyo, along with the daily price of the Vietnamese dong.
Mr. Lynh, a dapper 30-year-old former hotel manager, is the chief host and market maker. He emphasizes that he isn't a licensed broker and doesn't collect a fee for advice or for getting buyers and sellers together. "But we do encourage people to buy a beer while they're here," he says.
One afternoon, Tran Ngoc Tuan, a business-school teacher of economics, strolls in for coffee and a trade. He is long on Sacom, a Vietnamese cable company that accounts for the entire tech sector in Vietnam. He has a few shares in Ree, which makes air-conditioners.
"I think I want some more Sacom," Mr. Tran says, glancing at the company's 40% rise in just a few weeks' time on the board. "But what about the market environment?"
Mr. Lynh urges caution. Early last year, when share prices went up like that -- for no apparent reason -- they soon plummeted, also for no apparent reason.
"OK, forget about buying," Mr. Tran says. "I'll sell everything." Mr. Lynh agrees to find him a buyer, especially for the cable company, which makes fiber-optic lines for telephones and data transmission.
Stock analysis is a crude art in Vietnam. Few companies report sales or earnings, and the law doesn't require that such data be released. Investors get most of their information from friends or managers who work at the companies that interest them. The par value of all shares in Vietnam is set by the government at 100,000 dong (about $7). Gauging their market value is next to impossible.
Insider trading is rampant. In his cubbyhole of an office in the attic of the restaurant, Mr. Lynh opens a file cabinet full of balance sheets, company memos and earnings figures that he lends to regular customers. Many of the reports are from company managers who are regular customers.
"You might call it insider information," says Mr. Lynh. "But it's not really illegal here."
Vietnam in fact has sophisticated securities laws -- for "companies listed on the exchange." But there is yet no exchange, and the State Securities Commission winks at the gray-market trade in stocks, though a spokesman says it would "prefer the trading occur on the government exchange," when it gets going.
"We need to be cautious," says Vu Tien Dzung, deputy manager of the State Securities Commission, as he dodges falling chunks of plaster from workers preparing the trading center. "We don't want to make the mistakes that others in the region have made," referring to the Asian financial crisis.
Meanwhile, bulls and bears continue to graze at Indexx House. Over a plate of spiced chicken, a young banker asks Mr. Lynh for his advice on a company that makes telephone poles. They move on to Long An, which sells cashews, and Halong, which dominates the canned-fish market.
"Risky," says Mr. Lynh. "But have you considered buying a cable company?"