TPP may make Vietnamese stock market “boom”

VietNamNet Bridge – The Trans Pacific Strategic Economic Partnership (TPP) is believed to help the Vietnamese stock market experience the 2006-2007 golden days again. Textile and garment, footwear, seafood and pharmaceuticals would also get benefits from TPP.

TPP will bring similar effects like WTO

stock market, TPP

The registered FDI in 2005-2012 and the disbursed capital on HSX.

TPP is a multi-party free trade agreement aiming to establish a common free trade space for the countries in Asia Pacific. Analysts have pointed out that if Vietnam signs TPP, its national economy and the stock market would enjoy big benefits from the free trade, and that the TPP membership would bring the effects like WTO has brought to Vietnam.

Since 2007 when officially becoming a WTO’s member, Vietnam has attracted huge foreign investments, both foreign direct investment (FDI) and foreign portfolio investment (FPI). In 2007 alone, foreign investors disbursed VND22.875 trillion worth of capital.

TPP is expected to be an agreement with higher liberalization and openness. With the participation of the US and Japan, the benefits the agreement can bring are even bigger than WTO. Therefore, investors have every reason to think that the Vietnamese stock market would even be more bustling than it was in 2006 and 2007.

There is another factor which supports the stock market development that the VN Index has become much cheaper than in regional countries. The index has decreased by 64 percent so far, while Vietnam’s GDP has increased by two folds in comparison with 2007. The PE in Vietnam is 12.9, much lower than the other regional indexes.

Which economic branches get benefits from TPP?

Twelve countries have joined the negotiations for TPP, namely New Zealand, Brunei, Chile, Singapore, Australia, Peru, the US, Malaysia, Vietnam, Canada, Mexico and Japan.

If TPP is signed this year, the thing that all the member countries want to see, TPP will create a free trade area which accounts for 40 percent of the global total trade turnover. If South Korea joins the agreement, the figure would be 50 percent.

According to BIDV Securities Company (BSC), Vietnam would get benefits once the US and Japan open their garment, footwear, seafood and pharmacy markets.

Meanwhile, drinks, farm produce and public procurement will bear negative impacts.

Especially, brewery manufacturers have been warned that the import tariff cut from 45 percent on beer and from 30 percent on fizzy drinks to zero percent once Vietnam joins TPP would put domestic manufacturers in a cutthroat competition.

However, in general, TPP will bring more benefits than harm. The US exports machines, equipment, worth $500 million a year. Meanwhile, Vietnamese garment exports to the US in the first eight months of the year alone reached over $5.65 billion, while the export turnover of footwear or wooden furniture products was over $1 billion.

The industries in which Vietnam has big advantages will enjoy the tariff cuts, which will help boost its exports to the TPP member countries.

Garment exports, which now bear the tax rate of 7-15 percent, would enjoy the zero tax rate. The same would occur with footwear products. Especially, Vietnam would not have to be too worried about the anti-dumping lawsuits like the ones it has faced in the US catfish and shrimp markets so far.

Nguoi Dong Hanh

stock market, TPP