Time for strict listing rules

Previously, all profitable enterprises were eligible for listing but now they will have to be able to demonstrate profitability over a period of time. “A new regulation which means enterprises have to have a minimum return-on-equity (ROE) ratio of 5 per cent in the last year to be listed is very good rule,” said Quy.

Huy Nam, an independent equity analyst, said the market regulator should also consider total assets, rather than just chartered capital, for listing purposes. Huy added that to have higher stock quality, tightening listing rules was necessary. But market regulators should issue new regulations to ensure the effective operation of listed firm.

Currently increasing numbers of enterprises are floating shares to mobilise capital but their poor business results are causing share prices to plunge. “It is good to tighten listing rules, but also [to go ahead] with new share issuances,” said Huy.

Under the new rules, enterprises suffering three consecutive years of losses will be de-listed. But, Quy said regulations on liquidity, the release of information and corporate governance were also necessary if Vietnam wanted higher stock quality.

Huynh Anh Tuan, SJC Securities general director, said corporate transparency was more important to investors than profits. Profits could be cooked or falsely announced. “Therefore, if there is no transparency, there won’t be any good stocks, even with big profits,” said Tuan.
In a related development, the Ministry of Finance is finalising its decree on the amended Securities Law. The decree aims to raise listing standards and will go up for government approval.

Under those rules, a public company wanting to float shares must not only have recorded profit records for the previous two consecutive years but its ROE ratio must be at least 5 per cent for the latest fiscal year.

In addition, the minimum chartered capital of a public company must be raised to VND30 billion ($1.5 million), or up 300 per cent on previously requirements for listing on the Hanoi Stock Exchange (HNX).  

For the Ho Chi Minh Stock Exchange (HoSE), the country’s bigger bourse, the new requirement is VND120 billion ($5.79 million), up 150 per cent from the earlier VND80 billion ($3.86 million).  
The publicity ratio in a company will be also higher. For the HoSE, a company must have at least a 20 per cent stake owned by 300 retail shareholders. On the HNX, the ratio is 15 per cent stake to be owned by at least 100 retail shareholders.

Firms which are subjected to the older decrees will have five years to meet the new decree requirements, the draft stated. After 11 years, there are now over 683 listed firms on the HoSE and HNX. A total of 41 firms have made their debuts this year.