FIEs to hit bourse

Under the Decision 238/UBCK-QLPH, shareholding FIEs will only be able to list shares they sell through an initial public offering, and foreign investors will be allowed to hold a maximum of 30 per cent of the listed shares.
The new rules are made under the government’s Decree 144/2003/ND-CP on securities and the securities market, Decree 38/2003/ND-CP to transform FIEs under the limited liability company model into shareholding companies, and Decree 146/2003/ND-CP on foreign ownership on the bourse, which all entered into force since 2003.
Nguyen Thi Lien Hoa, head of the SSC’s Securities Development Division, said the new regulations were designed to prevent foreign investors from withdrawing all their capital from the listed FIE.
The plan on listing foreign invested firms on the bourse was first initiated in 2003 with the government Decree 38 to convert FIEs from the liability model into shareholding companies.
So far, Vietnamese government has given nod to ten FIEs to change business model, including Taya Vietnam, Interfoods, Austnam, Taicera, Tung Kuang and Royal International.
Financial experts said that to list foreign invested firms on the bourse is a trend of the economy, which will make the bourse more dynamic, however, to find effective measures to prevent the withdrawal of foreign investors’ capital after listing was not an easy task.
Hoa said that regulations would require a minimum ratio of chartered capital equivalent to 30 per cent to be held back from listing on the bourse.
For instance, she said, a foreign-invested shareholding company, which has a total chartered capital of VND100 billion ($6.6 million) will be permitted to trade 70 per cent of its chartered capital.
“If entire shares of foreign-invested shareholding companies to be listed are permitted to be traded on bourse, there may occur the case that foreign investors would withdraw all their capital from the foreign-invested firm and then shares of the firm will be kept by local investors,” she said.
Huong said that foreign invested shareholding companies to be listed had to meet the current regulations on listed firms, meaning that the maximum level of 30 per cent of listed shares will be kept by foreign investors.
“It would benefit owners of foreign-invested shareholding firms,” she said, adding that wholly foreign invested companies could sell shares to mobilise capital to invest in other projects or investment categories; whilst foreign invested joint ventures could transfer owners or even attract more foreign investors for their operation.
However, some financial experts said that the government’s decision to prevent foreign invested shareholding companies from listing 30 per cent of chartered capital on bourse goes against economic integration policies.
In response, Huong said that Vietnam was still a transitional economy, so prudent measures like that are necessary to avoid the withdrawal of capital from foreign invested companies, which may cause a domino effects.
Representatives of FIEs contacted by Vietnam Investment Review last week expressed their satisfaction with the SSC’s move.
Tony Huang, general director of Austnam, said: “The guidelines have been released much faster than we expected, thus facilitating us to float our assets on the bourse sooner.”
The Hanoi-based company, which specialises in producing steel roofing sheets and pre-engineering steel, has a chartered capital of VND17.62 billion, with British Virgin Island-registered Parnham Overseas Ltd. holding 65 per cent, Hong Ha Export-Import and Construction Company 33 per cent and Ausviet Industrial Investments 2 per cent.
“We see no problems in complying with the provisions of the circular. We think that it would help founders in FIEs to maintain their management role after their firms are transferred into shareholding concerns,” he said.
Nguyen Quang Vinh, director of Bao Viet Securities Company – the listing consultant for Taiwanese-owned electrical wire and cable producer Taya Vietnam, also hailed the move, saying “this is good news as it will create more commodities for the market and opportunities for investors to diversify their portfolios”.
“We have been engaged in preparation for Taya’s bourse listing right after the SSC releases the circular,” he said.
But Vinh said Taya had to complete a number of procedures before listing on the bourse, including the conversion into a shareholding concern, the payment of 2004’s 15 per cent dividends for its shareholders and equity capital adjustment.
“We hope that all the procedures will be completed by the end of August so that we can apply for listing on the bourse by mid-September. At such a pace, Taya would be the first FIE to list on the local stock market,” he said.
Taya Vietnam has chartered capital of more than VND182 billion ($11.6 million), with the two founders of Taya Vietnam – Taya and Dai Trien – holding a combined stake of 80 per cent and the public, strategic investors and staff holding the remaining 20 per cent.
Under the new rules, Taya Vietnam will be allowed to list only 20 per cent of its total shares on the bourse.