HaSTC set to manage OTC exchange in 2008

Dropping money on OTC trading is fraught with risk

The State Securities Commission (SSC) said draft regulations on unlisted stocks, shares of unlisted public companies would be channeled into an over-the-counter (OTC) stock transaction system run by the Hanoi Securities Trading Centre (HaSTC).
“We will test the system in October, this year,” said Nguyen Son, deputy head of SSC’s Market Development Department. He added that the system would be officially launched in January, 2008 if things ran smoothly.
Son said that unlike listed markets, unlisted stocks could be bought and sold without limits on lots and prices. “Investors can buy and sell one stock at a time,” said Son. Foreign ownership caps will remain at 30 per cent.
Stocks listed on the HaSTC are currently subject to a 10 per cent daily price variation limit and must be bought in minimum lots of 100. In addition, investors are not allowed to buy and sell the same stocks within the same trading session, according to HaSTC regulations.
The plan to form a market for unlisted stocks received overwhelming support from securities companies and investors, most of whom expect the move to reduce risks and increase liquidity.
“Trading unlisted stocks is very risky right now and market regulators need to put in place an OTC transaction system as soon as possible,” said Nguyen Thanh Ky, general secretary of the Vietnam Securities Business Association.
VPBank general director Le Dac Son said that market regulators should apply a trading band limit of 20 per cent, rather than no limit, in order to avoid stock price manipulation. “It would also be a good idea to set a closing price for investors’ reference,” he added.
Dragon Capital’s Hanoi branch director Pham Minh Tuan said the plan would help improve the mobilisation of capital, but public companies might not want to sell shares in the system if they found it was of no benefit.
“SSC should provide specific support, such as lower corporate taxes, to public companies to encourage them to trade shares in the system,” said Tuan.
Vietnam’s unlisted stock market is worth approximately $50-$60 billion, or two to three times more than the listed market, according to HSBC statistics. Between 3,000 and 4,000 stocks are traded on unlisted markets as public companies but only 625,000 companies have registered as public companies so far, 196 of which are floating shares with the Ho Chi Minh City and Hanoi Securities Trading Centres. Public companies are defined as those with chartered capital of VND 10 billion ($625,000) and 100 shareholders upwards.