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Stock market to limit shares foreigners can buy
Foreigners who plan to invest in the Lao securities market which will open at the end of this year will face some restrictions under a central bank policy to stabilize the currency exchange rate, according to a market regulator.
Lao Security Market Establishment Committee Vice President, Ms. Vatthana Daraloy, said on Thursday market regulators had a clear policy to allow foreigners to buy shares in companies listed on the stock market but their shares would be limited.
The restriction did not intend to discourage foreign investment but rather to prevent foreigners taking large amounts of foreign capital in and out of the country, which made it difficult for the central bank to manage currency exchange, she said.
Market regulators are now studying market regulations, which will set details on how many shares a foreigner can purchase.
Ms. Vatthana said if foreigners were allowed to buy and sell shares in companies freely, they could sell a large amount of shares at one time, which would result in a large outflow of foreign currency from Laos and possibly cause a devaluation of the kip.
Market regulators learnt about large outflows of foreign investment funds from major stocks in Asia after the region was hit by the global financial crisis, she said.
Foreign investors wanted to cash in their shares so they had more capital to shore up troubled businesses in their own countries, while others did not feel confident about investing in new business ventures when demand in US markets fell with the onset of the financial crisis.
Ms. Vatthana said many countries that today had successful stock markets had opened up to foreign investors slowly, and did not allow free foreign purchase of shares for many years until they were in a position to manage overseas in investment and could be sure money stayed in the country.
Although foreigners would not be able to purchase a large amount of shares in Lao companies, market regulators felt confident the market would have plenty of buyers because many Lao people, including business people, government officials and politicians, would have the right to buy as many of a company’s shares as they wanted, if they were confident the company would make a profit.
Market regulators will distribute business reporting forms, which companies will be required to fill in before they can sell their shares.
The company must report on their business performance and answer all buyers’ questions so they can make a decision to purchase shares or not, she said, adding that companies would not be allowed to give false information to attract more buyers.
The government decided several years ago to establish a Lao securities market, hoping to use it as a way to generate investment funds to drive the economy. Although a stock market can generate funds in this way, experts are urging the market to develop slowly to reduce the risk of financial instability.
VIENTIANE TIMES
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