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Foreigners to hold higher stakes in unlisted firms
Economists and investors appreciated a recent Government decision to raise the foreign ownership cap of unlisted and public joint stock companies from 30 to 49 per cent.
However, there are differing opinions on the impacts of the decision on the stock market and the over-the-counter market in the short- and long-term views.
In addition, some people claimed the cap was not enough to meet requirement of foreigners.
Foreign investors will be allowed to hold up to 49 per cent of shares in an unlisted, public joint-stock company, effective June 1, under a Government decision issued on April 15.
Decision No 55/2009/QD-TTg replaced Decision No 238/2005/QD-TTg, which had designated a cap of 49 per cent on foreign individual and institutional holdings in listed companies and investment funds but had regulated no such cap for unlisted firms.
The foreign ownership cap will remain at 30 per cent for domestic commercial banks for both the official stock market and the over-the-counter market.
The move was among measures suggested by the State Securities Commission to shore up investor sentiment, stabilise and develop the over-the-counter market.
Nguyen Son, director of the commission’s market development department, said it took nearly a year from drafting, getting opinions from economists, experts, investors and others to get final decision from the Government.
Explaining why the decision came out at this moment, Son said "The new rule matches the Law on Investment and the Law on Securities as well as Viet Nam’s market opening route under WTO commitments."
Some opinions affirmed the room increase would help foreign investors grasp opportunities to buy more shares of well-performing public firms, ignite investment by foreigners, improve liquidity and indirectly support the official market.
Deputy Director General of Tan Viet Securities Hoang Xuan Quyen said the decision would help raise the impact of foreigners on public enterprises they wanted to invest in, especially in areas of telecommunications, insurance, pharmacy, medical equipment and energy.
"The higher cap will create favourable conditions for unlisted companies to lure foreign strategic partners more easily and effectively," Viet Nam Association of Financial Investors general secretary Nguyen Hoang Hai said.
Tong Minh Tuan, deputy director of the Bao Viet Securities Joint Stock Company’s Analysis Department, believed the decision would have a positive impact on the market, more noticeable in the long term because foreign investors were preoccupied by the crisis.
The previous cap at 30 per cent was low and the State’s stake was big. This generated no great changes for State-owned enterprises, thus equitisation would have less meaning, said Nguyen Minh Phong, chief of economic research department at the Ha Noi Institute for Social and Economic Development.
The room increase was indispensable, it represented a clear route in opening the market so that investors and enterprises could devise appropriate strategies.
The State only put on some conditions in line with WTO commitments, Phong said.
However, some foreign investors had hoped the Government would raise the cap higher, up to 100 per cent.
Investors believed that greater foreign ownership would help restructure the local enterprises more effectively, standardise management to world-class and make them perform better.
"Viet Nam will open the market gradually under WTO commitments," said Son.
In some sensitive sectors, such as those relating to national defence security, foreign investors would not be permitted to invest. In financial, banking and telecommunication sectors, the State would still hold a stake.
But in normal fields such as trade, services and others, it could eventually be opened to even 100 per cent.
The Government would gradually issue more opening policies in line with the practical economic situation of the nation and WTO commitments, Son said.
Economists admitted there was much to be done by the Government to renovate the investment environment to place an equal playground for foreign and domestic enterprises and to issue policies specifically, transparently and stably.
Transparent financial reports play a significant role in sustainable development of a stock market.
"It is essential to impose vigorous penalties on auditing firms in case they give poor-quality financial reports or reports inaccurately," Hai said.
More than 300 hundreds companies are listed on the official stock market, whereas around 3,600 are trading on the still largely unregulated over-the-counter market.
It is important to control and legalise the big over-the-counter market. To do this, it is expected that the Ha Noi Securities Trading Centre would launch a market of unlisted public companies later this year as a necessary step towards a modern and professional over-the-counter market.
VietNamNet, Viet Nam News
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