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VietNamNews

SSC to outline details of foreign ownership

Update: August, 10/2015 - 07:51

The BIDV Securities Corporation (BSC) predicted that the stock market would likely continue to fluctuate this week to test the benchmark of 600 points. — Photo vietnamnet

HA NOI (VNS) — This week, the State Securities Commission (SSC) will hold a meeting with the two local exchanges, companies and investors to provide instructions to implement decree 60, issued in June to raise foreign ownership in Vietnamese companies.

That meeting, with some market moves, is expected to help the VN Index and the HNX Index gain this week. The decree had positive impacts on the market in July.

The BIDV Securities Corporation (BSC) predicted that the stock market would likely continue to fluctuate this week to test the benchmark of 600 points.

BSC said that the market could stay above the benchmark if foreign investors remained as net buyers like they were last week.

Viet Dragon Securities Corporation (VDSC) said that the decline of the market had been controlled, but it was not known if it would rise or not.

The company recommended that investors be cautious with market movements this week.

The national stock market decreased sharply last week, especially export companies, after discussions at the Trans-Pacific Partnership (TPP) failed to come to agreement.

That negative information not only affected exporting companies, but also had bad impacts on blue chips and large-cap shares through the week, resulting in strong selling by shareholders.

But positive progress in the discussion of the Free Trade Agreement (FTA) between Viet Nam and the European Union as well as coming instructions for implementing decree 60 in August helped the market to remain under the testing benchmarks on both bourses.

At the end of last week, the VN Index on the HCM Stock Exchange lost more than 17 points to 603.7 points and the HNX Index on Ha Noi Stock Exchange dropped 1.47 per cent to 83.88 points.

The local indices had a rough week. Both had three declining sessions and two improving ones.

Securities investors were more cautious with their investments, resulting in lower market liquidity compared to the previous week.

On both local markets, a total of 736 million shares were traded worth VND12.22 trillion (US$560.55 million), a decrease of 10.5 per cent in volume and 16 per cent in value compared to the previous week.

Foreign investment last week reached a total net buy value of VND270.4 billion ($12.4 million) on both bourses, including VND239.4 billion ($11 million) on the HCM market. However, it did not focus on leading shares and did not have high purchasing value in either session – except the last one.

On the southern bourse, Petrovietnam Power Nhon Trach 2 Joint Stock Company (NT2) and Sai Gon Securities Incorporation (SSI) received the highest foreign investments.

On the northern market, total foreign purchases amounted to VND31 billion ($1.42 million) with the focus on PetroVietnam Coating Joint Stock Company (PVB), VNDirect Securities JSC (VND), TNG Investment and Trading JSC (TNG) and Petrolimex Petrochemical Corporation JSC (PLC).

On the market, 15 of 23 sectors declined. Insurance companies had the highest drop with a decline of 9.33 per cent in market value, followed by the banks with a drop of 4.63 per cent in market value.

Steel producers were the best gainers with a rise of 4.5 per cent in market values.

Speculative shares such as property developer FLC Group (FLC), Duc Long Gia Lai Group Joint Stock Company (DLG) and Ocean Group Joint Stock Company (OGC) still attracted a lot of investments.

Limitations removed

The State Securities Commission (SSC) will hold a seminar this week to provide market participants and businesses with detailed information about Decree 60 on foreign ownership limits.

SSC vice chairman Nguyen Thanh Long made this announcement during an online conference on the website chinhphu.vn late last week. The meeting is expected to take place on August 13.

Decree 60, issued on June 26, 2015 and comes into force on September 1, will remove limitations on foreign ownership in the securities market.

This is a much-watched issue that has attracted attention from the investor community but, to date, the regulation on sectors that are conditional for foreign investment remain unclear. The market is awaiting the circular providing guidelines to implement the decree.

"Under the Ministry of Finance's direction, the commission has completed guiding circulars and will hold a seminar on Thursday to provide the details," Long said.

"Guiding circulars will be issued soon in the near future."

According to Decree 60, the foreign ownership ratio will adhere to specific laws and international treaties, to which Viet Nam is a member. However, the breakthrough provided by this decree is the full removal of the foreign ownership cap, which is currently limited to 49 per cent in public companies.

Further, companies will be allowed to determine the percentage of foreign holding in its charter of operation.

Those conditional businesses that have not specifically regulated foreign ownership limits will have the current maximum ownership of 49 per cent to be temporarily applied.

Other businesses, such as banks, will continue to have foreign ownership limited by specific regulations.

"The introduction of Decree 60 is the most brilliant offer to foreign investors," said Vo Tri Thanh, deputy director of the Central Institute for Economic Management (CIEM).

Thanh said the decree was issued at the right time, as Viet Nam is integrating more deeply into the world, which contributed to ongoing legal reforms in the country.

However, though the decree is laying a very good foundation to attract foreign capital, analysts said the core issue was still the businesses, themselves.

Long noted that foreign investors pay much attention to operations of companies, corporate transparency and efficiency. — VNS

According to Le Anh Tuan, chief economist and deputy general director at Dragon Capital, foreigners often complain about the lack of information about companies.

"Financial reports and other documents from companies are available, mostly in Vietnamese. Therefore, if they have an investment plan, foreign investors must seek information by themselves," Tuan said. — VNS

He also emphasized that the first thing that may interest foreign investors was a company's transparency and determination of its board of directors to improve their business.

Additionally, SSC's vice chairman Nguyen Thanh Long said the relaxation of the foreign ownership limit would result in spillover effects that could help lift the Vietnamese stock market's position from being labeled as a "frontier market" to an "emerging market".

With the higher level of development, the domestic market would likely draw more foreign capital and part of it would be channeled into small – and medium-sized companies. – VNS

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