|Investors watch market developments at the VP Bank Securities trading floor. Viet Nam has a population of 91 million people and a modest stock-market capitalisation of about US$46 billion, equivalent to just 25 per cent of the country's GDP. — VNS Photo Truong Vi
HA NOI (VNS) — The Capital Market Working Group yesterday suggested making changes to the restructuring of State-owned enterprises (SOEs) to attract more foreign investment.
The suggestions were made at the mid-term Viet Nam Business Forum which began yesterday in Ha Noi.
A working group representative, Nguyen Kien, said although the State Securities Commission had been actively building more favorable regulations to support investors, the obstacles impeding the development of the stock market required timely and solid action by Government.
Viet Nam has a population of 91 million people and a modest stock-market capitalisation of about US$46 billion, equivalent to just 25 per cent of the country's gross domestic product (GDP).
According to Kien, this value is much lower compared to similar figures for other ASEAN countries, such as the Philippines, which has market capitalisation of $184 billion, or 65 per cent of its GDP.
And Thailand has a market cap of 112 per cent of GDP; Malaysia, 88 per cent; Singapore, 135 per cent; and Indonesia, 45 per cent.
"This shows that the current Vietnamese stock market is not strong enough to support the country's SOE equitisation," Kien said.
He said the total value of State enterprises to be equitised in the next three years would be about $25 billion. If the Government expected to sell 15 per cent of these stakes, the market would need $3.75 billion to absorb these shares.
However, Kien said domestic funds could not afford to buy these shares and the market would need new foreign investment inflows.
The working group suggested to the Government two issues, obligatory listing for equitised businesses and increasing the sales of SOEs' shares to 25-30 per cent through high-status and international securities brokers to boost liquidity.
Foreign investors have been long awaiting for the Government to lift foreign holding limits in public companies, as well as to approve the amended Decree No 58/2012/ND-CP, which would bring some significant changes on conditions applicable to IPO (initial public offering) of enterprises and listing of public companies.
Kien said Viet Nam should also make a bold move to remove the restrictive ownership limit of 49 per cent applicable to public companies to attract foreign inflows in the stock market and in newly equitised State businesses.
This would be in line with the Viet Nam's commitments with the World Trade Organization (WTO) for servicing public companies, Kien said. He also suggested opening up the entire market by allowing wholly foreign ownership in companies operating in areas not covered by WTO commitments, except for conditional businesses including national security.
According to the working group's report, foreign investment in the Vietnamese stock market this year was weak, with a net inflow of $113.3 million in the HCM Stock Exchange and just $5 million in the Ha Noi's exchange from the year to May 19.
The Capital Market Working Group is one of the working groups under the Vietnam Business Forum. — VNS