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More companies switch to HCM City’s bourse
Expect to see more companies relocate their shares from the Ha Noi Securities Trading Centre (HASTC) to the HCM City Stock Exchange (HOSE), especially big cap stocks, said executives.
In recent weeks, leading brokerage Saigon Securities Inc (SSI) and Minh Phu Seafood Co have announced their intention to move their shares to the more renowned HCM City exchange.
“Switching bourses has nothing to do with a decision from the board of directors, but pressure from shareholders,” said Bui Sy Tuan, financial director at Minh Phu Seafood.
At a recent meeting, 99 percent of shareholders voted to make the switch, arguing that the HOSE garners greater attention, particularly from foreign investors, which will potentially help liquidity and stock price.
Minh Phu Seafood has submitted documents to the HOSE and expects to get a response from bourse regulators by the end of the week over whether the company can list on the southern exchange.
If everything goes smoothly, said Tuan, the company will join the HOSE in November at latest.
General director of SSI, Nguyen Duy Hung said in an interview on Oct. 1 that the brokerage hopes to make its change on October 29, along anticipated move among investors who predict share prices will surge once the company enters the HOSE.
The switch is to satisfy investors demands, while “our foreign shareholders have also suggested we move to increase SSI liquidity,” said Hung.
SSI and Minh Phu Seafood are not the first companies to relocate shares to the HCM City exchange this year, and will unlikely be the last. Several factors have contributed to the trend.
One of these was that the Government announced in September 2006 that it would cease giving tax incentives to companies that went public from January 1, 2007, prompting many companies to rush to list before this date.
The Ha Noi exchange, with less strict requirements to list and a shorter waiting period, was the obvious choice. However, once they had secured the tax benefits, these companies were eager to move to the HCM City bourse.
Companies such as Pha Lai Thermal Power and Vinh Son-Song Hinh Hydropower switched to the HOSE at the start of the year. These bigger companies also understood that on the Ho Chi Minh City exchange there were greater opportunities to raise capital.
Another initial motivation was that the Ha Noi bourse applied continuous order matching that made transactions easier and more transparent. Then, the HOSE began offering the same trading system this year, putting it a level playing field, according to executives.
The Ha Noi trading centre though, remains an attractive destination for smaller companies that do not meet all the legal and financial requirements set by the HOSE, said Dang Phan Tuong, head of equitisation at State utility giant Electricity of Viet Nam.
Listing on the Ha Noi bourse first also allows companies to raise capital and then improve their business practices and financial performance for a later move onto the HCM City exchange.
General Director of a Ha Noi-based investment fund said that the HASTC was designed for over-the-counter shares and small cap stocks, so it was understandable to see bigger companies relocated once the incentives were removed.
The Ha Noi exchange will likely continue playing an important role in Viet Nam’s equity market. The Government plans to develop a separate trading system in Ha Noi for the bond market by 2010, while listing about 100 trillion VND in debt products.
With the growth of the bond market and ongoing capital needs, there is little concern the HASTC will be reduced to a second rate exchange not worth mentioning. “To some extent, SSI’s switch will have a negative, short term impact on the trading atmosphere on the Ha Noi’s stock exchange, because SSI represents 30-60 percent of HASTC’s total trading volume,” said Hung.
“The bourse, though, will welcome more listed companies who operate in attractive industries such as petroleum,” and as a result rebound after SSI and Minh Phu Seafood relocate their shares, said Tuan.
HASTC Director Tran Van Dung said decisions to switch bourses remains an indication of a company’s capital needs, not the quality of HASTC products and services. The exchange, though, continue to improve service quality and adopt new technology, he added.
VNA
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