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Stock market lacking FIE shares
Analysts say that the stock market still needs foreign-invested enterprise (FIEs) shares which are powerful and able to exert influence on the market.
Currently, only seven FIEs are listing shares on either the Hanoi or HCM City bourse.
FIEs are businesses which previously operated as limited companies but have since become joint-stock companies.
The seven currently listing are Mirae Joint Stock Company (KMR), Mirae Fiber (KMF), Taicera Pottery Industry (TCR), Chang Yih Tile (CYC), Tung Kuang (TKU), Taya Electric Cable (TYA) and Full Power (FPC).
All seven are medium-scale companies, while none of them is considered a ‘blue chip’ in the market. If comparing the prices of the FIEs and the prices of other stocks, one would see that the FIEs’ share prices are low. For example, KMR is now trading at 12,000 dong, KMF 11,000, TCR 10,000 and CYC 11,000 dong. Meanwhile, TKU is trading at 11,000 dong only, TYA 10,000 and FPC just a little higher than 13,000 dong.
One reason why the prices of the shares are low is that these enterprises all met a lot of difficulties in 2008. The main clients of this group of enterprises are foreign-invested enterprises in Vietnam and export markets, while both of these have been heavily influenced by the global economic crisis.
Additionally, securities experts say that in these FIEs, the majority of shares are held by founding shareholders or foreign parent corporations. That is why the enterprises only list some of their shares, which also makes the liquidity of their shares low.
The previous legal documents stipulated that if foreign investors of FIEs held more than 49 percent of the total shares issued to the public before the FIEs were listed, they had to sell shares after the listing to ensure that the ceiling foreign ownership ratio in the companies was not higher than 49 percent.
Most of the said seven FIEs had the foreign ownership ratio higher than 49 percent when they fulfilled procedures to list and they had to commit to sell stakes to reduce the ratio.
However, the recently applied legal framework provides more favourable conditions for FIEs to list on the bourse. Under the newly established regulations, FIEs in which foreign investors hold more than 49 percent of capital are able to keep the same foreign ownership ratio when they list on the bourse.
With the flexible regulations, FIEs will be able to list more shares on the bourse.
Experts believe that the new regulation will benefit both the stock market and businesses. The market will be more bustling with the appearance of more blue chips, while the stocks will be more attractive thanks to higher liquidity.
The experts also said that if the stock market continues recovering, more big FIEs will list their shares on the bourses. FIEs have their own advantages, including experience in carrying out big international projects, have modern corporate governance skills and apply modern technologies in production. The enterprises also have advantages in export, especially when they export products to their home countries.
VietNamNet, DTCK
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