14/07/2015 15:28 GMT+7 Email Print Like 0

Foreign ownership law lifts securities market

HCM City, July 14 (VNA) – The securities market in HCM City has seen positive changes since the issuance of Government Decree 60/2015 which would permit a higher rate of foreign ownership in domestic public companies.

The decree amends and supplements several articles of Decree 58, providing details and implementing guidelines on several articles of the Law on Securities and Amended Laws on Securities.

The new decree, due to take effect on September 1, will remove limits on foreign ownership in listed companies.

Current regulations cap foreign stakes in public companies at 49 percent.

Under the new decree, a foreign stake can be lifted to 100 percent for most sectors, and firms will also be allowed to propose their own limits.

However, the limit on foreign stakes at banks will be retained at the existing level of 30 percent.

Le Nhi Nang, Head of the State Securities Commission in HCM City, said the increase in foreign ownership ratio in the securities market would benefit both foreign investors and the listed firms.

In particular, the former would have more opportunities to participate in managing the listed Vietnamese companies, while the latter would be managed more effectively and transparently, thus enabling them to attract more overseas capital, Nang said.

The domestic stock exchange would also be able to attract more foreign capital to improve its liquidity, helping it become a member of newly emerging market groups.

The change in the foreign-ownership rate would also permit sustainability of funds so domestic firms would no longer have to depend on credit from commercial banks.

Nguyen Thanh Long, Vice Chairman of the State Securities Commission (SSC) said that the objective of Decree 60 was to help struggling enterprises seek new sources of capital and improve restructuring plans.

The new decree is consistent with Vietnam's commitments to the World Trade Organisation (WTO), which allows for more foreign indirect investment in the securities market.

According to market analysts, dozens of listed companies in domestic bourses had run out of room for foreign investors, so changes in Decree 60 will allow those foreigners to become strategic shareholders.

The local market has in recent days registered a significant increase in points although the new decree has yet to come into effect.

On July 7, for instance, the VN-Index increased 10 points to close at 330.27 points. The market also received a new flow of capital from overseas investors.

Analysts, however, said that while changes in the new decree were welcomed by foreign investors, many domestic investors were concerned because their ownership ratio would likely drop due to the higher stakes of foreign investors.

Huynh Anh Tuan, Director of the SJC Securities Company, said that 80 percent of domestic investors in the securities market were still small, so they would not be able to compete with major investors, particularly foreigners.

Nang, Head of the State Securities Commission in HCM City, said he was concerned about the possibility that listed domestic companies would likely be usurped by foreign investors who could buy domestic companies' stakes without any limits.

He said Vietnamese firms should conduct careful studies of foreign partners to ensure that they would closely cooperate with them in implementing long-term strategies for the sake of the company's development, and for the interests of the two sides and the shareholders.
VNA/VNP