According to the State Securities Commission (SSC), a total of 519 companies are listed on Vietnamese stock exchanges, including 229 on HOSE and 290 on HNX (excluding companies listed on UPCoM). The number is not small in comparison with international practices but the quality of goods is not high, as top companies in many industries have not been listed.
Difficulty in privatising large firms
In fact, many well-known companies are listed on the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX). They are chiefly equitised State-owned enterprises and giant private concerns.
However, according to experts, the Vietnamese stock market lacks the presence of top companies in important sectors like telecommunications, mining and oil and gas. For instance, no big telecom companies are listed on the stock exchanges. The delay in privatising large companies like Mobifone and Vinaphone may weaken the appetite of investors for shares of these companies as the telecom market will reach a saturation point in the near future, leading to slowing growth.
Regarding the mining industry, investors are waiting for the equitisation of the Vietnam National Coal - Mineral Industries Group (Vinacomin). According to many experts, it is impossible to push the privatisation of Vinacomin at the current pace of corporate restructuring. We cannot expect a rapid change in corporate governance during the processing of equitising a large group with many member companies. Hence, in the medium term, the stock market can hardly expect a leading role from a top company like Vinacomin.
Regarding the oil and gas industry, the equitisation and listing prospects of the Vietnam National Oil and Gas Group (PetroVietnam) and the Vietnam National Petroleum Corporation (Petrolimex) are similar to those of Vinacomin.
The Vietnam Association of Financial Investors (VAFI) said the equitisation of State-owned economic groups is a must, given that better corporate governance will boost operating efficiency. However, the top concern is a proper evaluation of these groups as it is much more difficult than evaluating a single company.
Other potential companies
It is not common practice for foreign-invested companies to go public and list on underdeveloped markets like Vietnam.
In fact, FDI enterprises in Vietnam established on the basis of capital contribution by individuals or small foreign companies do not have as effective business as domestic enterprises. In addition, well-performing companies choose to list on their homeland markets as they see better fundraising there.
Companies, equitised but unlisted, are mainly not well-performing. Besides, they do not wish to list immediately and their corporate governance is usually worse than listed concerns of the same industry.
Need high quality goods
According to many experts, the Vietnamese stock market still needs more goods; not in greater number, but with higher quality. Therefore, Vietnam needs to improve the quality of listed goods by many measures. Particularly, it should uplift listing standards on HOSE and HNX. Thus, disqualified companies on HOSE will be switched to list on HNX and disqualified listings on HNX will be moved to UPCoM market.
According to VAFI, Vietnam needs to accelerate the sale of State equity in many listed companies by gradually cutting holdings, entire sell-offs or mergers with strong firms.
In banking, securities and insurance, the Government needs to impose policies to stop setting up new entities and raise the charter capital limitation on financial institutions to reduce the number of financial institutions, concentrate resources and minimise stiff and unfair competition. The State Bank’s regulation on minimum legal capital in commercial banks is on the right track and consistent with international practices.
VAFI said higher quality of goods will help increase the attractiveness of the market, reduce risks for investors, especially individual investors, while creating more favourable conditions for well-performing enterprises to raise capital. This is probably a new strategy that the State Securities Commission (SSC) and concerned agencies need to take into consideration for planning market development in the 2010-2020 period.
Quynh Chi
Vietnamese
