Vietnam is proposing to allow foreigners to take full ownership of some joint-stock companies and set up wholly owned securities firms in an effort to bolster the stock market.
Overseas companies can acquire as much as 100 percent of the registered capital of brokerages, up from the current maximum of 49 percent, or establish wholly owned securities firms if they have been operating in the banking and insurance industries for two years and posted a profit in the most recent two years, according to a draft measure posted on the State Securities Commission’s website.
“The draft measure is surprisingly good as we did not expect any new developments this year with regards to changes in the rule,” said Attila Vajda, Ho Chi Minh City-based analyst at ACB Securities.
Vietnam will allow foreigners to increase their stakes to 100 percent from 49 percent in public joint stock companies that have been converted from so-called foreign-direct investment enterprises, according to the draft. The investment cap at most public joint-stock companies will still be kept at 49 percent. There are about 700 companies listed on the country’s two exchanges while there are about eight companies that have converted from being FDI enterprises, ACB Securities said.
The proposal would help foreign investors “to be able to participate more fully in the Vietnamese securities industry,” said Brett Krause, Ho Chi Minh City-based country manager for Citibank N.A. Vietnam. “Citi is working closely with the State Securities Commission to develop the market and enable world- class funds and broker dealers to set up business in Vietnam.”
Public joint-stock companies are enterprises that either have shares listed on exchange, have already sold shares to the public or have shares that are owned by at least 100 investors and have registered capital of at least 10 billion dong ($478,000).
Allowing foreign investors to increase their stakes in publicly listed brokerages and joint-stock companies may boost liquidity in the stock market. The benchmark VN Index (VNINDEX) has fallen 21 percent from its high this year on May 8, more than the 20 percent some investors consider a bear market. It dropped 0.6 percent at the 2:15 p.m. local-time close today.
Foreign investors are very interested in buying shares of companies in some industries such as banks or consumer goods, according to Giang Trung Kien, head of research at FPT Securities Joint-Stock Co. “For some good companies like Vietnam Dairy Products Joint-Stock Co. (VNM), overseas investors always want to raise the cap to more than 49 percent.”
The State Securities Commission is seeking public comments for the draft measure by Oct. 12, it said in the statement on its website.
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