Wave of SOEs Equitization drives up Vietnam stocks

By Thien Huong - Nov 17, 2017 | 07:06 AM GMT+7

TheLEADERIn addition to private companies' initial public offering (IPO) plan, many state-owned enterprises (SOEs)' equitizations have strongly boosted Vietnam's stock market recently.

Wave of SOEs Equitization drives up Vietnam stocks
Mr. Pham Hong Son gave a speech at Nikkei Asian Review's Hanoi Forum in Nov 15. Photo: TL

After 17 years of operation, Vietnam stock market is considered the youngest but fastest growing market in terms of scale and liquidity among ASEAN countries. VN Index has reached 882 points, the highest level since the financial crisis in 2009.

VN-Index has increased more than 30% this year. Moreover, on August 10, Vietnam officially opened the derivative securities market, of which the first trading product is future contract of VN30 index.

Vietnam stock market has become more and more attractive to both domestic and foreign investors partly thanks to the Government's specific policies and plans in accelerating the equitization and divestment of SOEs in the future.

To dig deeper into the issue, TheLEADER had an interview with Pham Hong Son, Vice Chairman of the State Securities Commission of Vietnam about issues related to SOEs equitization process and the outlook of Vietnam stock market.

How has the active privatization process of SOEs been reflected in the stock market?

Pham Hong Son: Currently, the total market capitalization of both stocks and bonds is over 100% of GDP, significantly higher than that of a few years ago.

In 2006, the country's two stock exchanges only had 192 listed companies in which only one listed company had market capitalization of over US$1 billion. At present, these numbers have soared to over 700 and 23 respectively.

In the near future, we will continue to follow closely the direction of the Prime Minister in the divestment process, thereby generating a good supply for the market and enhancing the attractiveness of Vietnam stock market.

The stock indexes have soared since the beginning of the year. Do you think this is a golden moment to help the Vietnamese stock market grow remarkably in the coming time?

Pham Hong Son: I think this is a lifetime opportunity. It is no accident that both domestic and foreign investors are very interested in the Vietnam stock market thanks to its positive economic outlook as considering both supply and demand.

In addition, the liquidity of the stock market is very positive with a 50% increase from VND3,000 billion (US$132.6 million) per session in 2016 to VND4,500 billion (US$199 million) per session in 2017.

Foreign investors, before making an investment decision, firstly observe business' performance, then the market's liquidity, and third, the market's transparency and lastly the discipline of the market. I think we are doing all quite well.

Have SOEs' equitizations met the criteria and requirements that you mentioned?

Pham Hong Son: I think gradually SOEs will reach those requirements. Companies that have been listed on the stock market need to comply with market requirements. This is a way to make SOEs transparent because the most basic requirements of the stock market are nothing but transparency and fairness.

From your perspective, what are the challenges for SOEs in the equitization roadmap?

Pham Hong SonFrom business' aspect, they have to ensure information transparency, improve their management capacity and comply with regulations. In addition, each business has its own challenges related to their own field and industry. From the authority's aspect, we will supervise and monitor thoroughly the process.

A problem has been risen from the process that some SOEs have not been fully valued, resulting in loss of national budget. In your opinion, what measures should be taken to handle the issue?

Pham Hong Son: I think that the process of divesting capital from SOEs is now relatively well regulated. The Government strictly controls the valuation and public auction of SOEs' equitization process. The authority will soon implement Decree 91 on capital withdrawal and equitization.

Does State Securities Commission have any plan to accelerate the development of Vietnam stock market as well as ensure the confidence of the market?

Pham Hong Son: In the coming time, the legal framework for the capital market - especially the derivative market, newly opened in August, will be further improved, in which the Ministry of Finance is expected to complete the amendment of the Securities Law in 2019.

In line with Enterprises Law 2015 and related ones, the amended Securities Law will certainly facilitate enterprises to mobilize capital through the issuance of shares and bonds, create a legal framework for launching new products to the market, improve the quality and efficiency of securities market's inspection and supervision and finally, ensure the sustainability and transparency of the market.

Thank you very much!