Vietnam Targets 200 Listed Firms in 2006

Vietnam Targets 200 Listed Firms in 2006 

Vietnam expects to list 100 to 200 more new firms on the local stock exchange this year, said Deputy Prime Minister Nguyen Tan Dzung in the inauguration of the Hanoi Securities Trading Centre on March 8.

Vietnam's fledging stock market, however, has attracted just 28 firms after five years in operation and more than 1,000 trading sessions. What can the State Securities Committee do to meet this target?

An Irrational Fact

It is obvious that listing on the stock exchange brings a lot of benefits. All activities of listed firms are transparent and publicly launched, the ups and downs of share price reflect the reaction of the market against the performance of enterprises. The listing will help to improve the liquidity of listed shares and enhance the performance of companies via the supervision of the stock market.

However, there is an irrational fact that only 28 firms have been listed while Vietnam has privatized 2,500 State-owned enterprises, equivalent to 2,500 kinds of stocks.

According to Nguyen Doan Hung, deputy director of State Securities Committee (SSC), to list or not to list will be decided by the shareholders. Yet, the State still holds the majority stake in most privatized enterprises, in other words, it still controls the right of decision making.

The State asset owners do not want to list State-owned shares yet as they have not seen the benefits of listing or they may not be ready to publicly release the operations of their firms. This is a barrier to the development of the official stock exchange.

So far, the listed firms are mainly equitized State-owned enterprises, which have been converted from wholly state-owned firms to privatized firms. The companies that have launched initial public offering (IPO) often offer shares to investors under the control of the State Securities Committee.

Under current regulations, firms who want to launch IPO are managed by four agencies. The Ministry of Finance controls equitized enterprises, the State Bank controls credit institutions, the Ministry of Planning and Investment controls foreign-invested firms, and the State Securities Committee controls the joint stock companies. This cumbersome management will create different ways of offering shares to the public.

Vietnam’s bourse has attracted millions of investors, however, investment in the stock exchange has not seem corresponding growth.

Vietnamese people would deposit their money in banks rather than in the stock market, Hung said, adding this means of financial investment is both safe and profitable. Moreover, the stock market is a risky market while the public’s knowledge about it is not strong; the same is true for many Vietnamese enterprises. Institutions such as trust funds have not developed in Vietnam yet. It seems that only a small number of active enterprises take part in this kind of market.

The scale of the current stock market is too small with capitalization of VND2.3 trillion, or US$145 million, compared with $50-60 billion in other ASEAN countries.

How can Vietnam’s stock market develop?

According to economic experts, the Vietnam stock market will become more strongly developed due to increasing equitization as well as more listings. The bourse’s capitalization will be expanded several times. There will be more investment funds introduced to attract capital from enterprises and individuals. In addition, foreign investors will be allowed to seize more stakes in listed companies, attracting more foreign investment in the market.

Vietnam at present has large and urgent plans to develop its stock market, however, it is necessary to understand the significance of linking equitization with listings on the stock exchange.

• Lan Anh