2017—A year of “firsts” for Vietnamese stock market

January 03, 2018 | 16:19
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VIR put together a brief recap of the ten most noteworthy “ups-and-downs” of the Vietnamese stock market over the course of 2017, from the launching of a brand new market to unprecedented criminal prosecutions and billion-dollar state divestitures.

1. Government kick-started the derivatives market

On August 10, at Hanoi Stock Exchange (HNX), the Ministry of Finance (MoF) launched the opening of the derivatives market, indicating the first of many steps to promote the structural development of the Vietnamese securities market.

Consequently, Vietnam was the fifth nation within the ASEAN to acknowledge the derivatives market, alongside Singapore, Malaysia, Indonesia, and Thailand. The country was the 42nd nation across the globe to acknowledge this market.

The first seven securities companies entering the derivatives market were Ho Chi Minh Securities Corporation (HSC), Saigon Securities Incorporation (SSI), BIDV Securities Company (BSC), VNDirect Securities Corporation (VNDS), Viet Capital Securities (VCSC), and VPBank Securities Company (VPBS).

The derivatives market debuted as a major part of the structural development of the Vietnamese securities market

2. VN-Index hits record with 48 per cent surge

At the end of 2017, VN-Index recorded 984.24 points, 48 per cent up against the same category in 2016. Vietnam’s benchmark index scored the world’s third highest and was the first in Asia thanks to the optimistic economic growth, the positive performance of numerous businesses, leading enterprises like Petrolimex, Vietnam Airlines, Vietjet, Vincom Retail, and VPBank holding their IPO in 2017, as well as overwhelming share purchases of nearly VND26 billion ($1.1 million) by foreign funds.

Additionally, the Vietnamese stock market’s capitalisation reached 73 per cent of the gross domestic product (GDP), which exceeded the targeted cap set out by the government for the year of 2020.

3. Leading enterprises debuting on the stock market following state divestment

2017 witnessed a series of giants in various fields, such as aviation services, finance-banking, retail shopping, and petroleum supply, listing for the first time on the Unlisted Public Company Market (UPCoM) as well as launching their initial public offering (IPO) on the Ho Chi Minh City Stock Exchange (HSX) or the Hanoi Stock Exchange (HNX). The top five enterprises entering the Vietnamese stock market were Vincom Retail, Vietnam Airlines, Vietjet, Petrolimex, and VPBank, offering their shares for the first time at remarkably high starting prices.

Likewise, the government successfully completed the divestment of numerous state-owned enterprises, including the nearly VND9 trillion ($396.2 million) divestment of a 3.33 per cent stake in Vinamilk (VNM) and the nearly VND110 trillion ($4.8 billion) divestment of 53.59 per cent in Sabeco (SAB).

The State divested Sabeco this year, gaining billions of dollars in proceeds

4. Second criminal prosecution for stock manipulation in the history of Vietnam

Nguyen Van Giang, former director of the Hanoi branch at DongA Securities Company, was indicted for manipulating share prices of Consultancy Design & Urban Development JSC (CDO) on HSX, following the indictment of Le Van Dung, former president of the Board of Directors (BoD) at Vien Dong Pharmaceutical JSC, who manipulated the price of Ha Tay Pharmaceutical JSC (DHT) in 2011.

As a result, the provisions of the 2015 Criminal Code (effective from January 1, 2018) specified the charge of "securities market manipulation" which exceeds VND500 million ($22,014) or causes losses of over VND1 billion ($44,028) to investors to be a criminal offence drawing a fine or a penalty of 6-36 months of imprisonment.

5. Introducing VNSI and VNX50

2017 also saw the introduction of the VN Sustainability Index (VNSI) to the stock market, with 20 types of shares. Previously, HSX partnered with the German Development Cooperation (GIZ) and the State Securities Commission (SSC) to conduct a research and implement the sustainability index.

Specifically, the index was designed with the aim of determining the sustainability standards of listed enterprises, providing assistance for investors (organisations and individuals) in search of socially responsible investing (SRI) firms or “green investments”; enhancing the sustainable development of the entire economy; identifying criteria for an ideal environment, society, and administration; providing new investment instruments; as well as making an innovative contribution to the growth of the stock market and the health of the economy.

Likewise, HSX and HNX officially introduced the VNX50 index, the purpose of which is to provide investors—both foreign and domestic—an overall outlook on the entire market, including identifying the specific traded shares with the largest rate of capitalisation.

6. Vietnam’s 2017 Annual Report Awards (ARA) celebrated 10th anniversary

Starting from the beginning of 2017, the annual reports were evaluated by four leading audit firms, including Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers (PwC), with the intent to ensure the accuracy and objectiveness of the qualifying process.

Besides, 2017 was also the first year HNX, along with HSX and VIR, co-organised the programme and sat on the judging panel. The participation of enterprises in the tenth edition laid a strong emphasis on information transparency, setting a great example for other enterprises to follow.

7. New guidelines on corporate governance for public firms

Decree No.71/2017/ND-CP dated May 6, 2017, stated at least one-third of the board of management of a listed company have to be independent members. However, if the public companies are unlisted, the composition of the board of management must ensure that at least one-fifth of the BOD are independent members.

8. New payment mode for G-bonds

From August 1, 2017, the new payment mode for transactions of government bonds goes through the State Bank of Vietnam (SBV) instead of through Commercial Bank for Investment and Development of Vietnam (BIDV). MoF called this new launch as a breakthrough innovation of the bond trading system in order to catch up with international practices as well as achieve the 2020 plan for a cashless society.

9. Unprecedented suspension of an auditing firm’s CEO

For the first time within the 20-year history of the stock market, SSC issued a decision on suspending the auditor status of auditors Nguyen Ngoc Tinh (CEO) and Nguyen Thi Gam of Hanoi Auditing and Accounting Company Limited (CPA Hanoi).

Likewise, SSC also disapproved the 2016 financial statement of 15 public firms—most of which were listed on the stock market—for the first time.

The 15 public firms that had their financial statements disapproved by SSC

  • KLF Joint Venture Global Investment (HNX: KLF)
  • Song Da Investment And Construction (HNX: SDD)
  • CMC Investment (HNX: CMC)
  • Hung Long Mineral and Building Material (HNX: KHL)
  • Information and Networking Technology (HSX: CMT)
  • Nafoods Group (HSX: NAF)
  • Artex Securities Corporation (UPCoM: ART)
  • Kenanga Viet Nam Securities (OTC: KVS)
  • Hong Ha Viet Nam (UPCoM: PHH)
  • Da Nang Steel (UPCoM: DNS)
  • FLC Group (HOSE: FLC)
  • Binh Thuan Mineral Industry (HOSE: KSA)
  • Vietnam International Securities (OTC: VISE)
  • HFT Securities (UPCoM: HFT), previously known as Mekong Securities
  • Woori CBV Securities (OTC: Woori)

10. The first market maker-centric mechanism policy to be issued

The new regulation will further expand the scope and quality of the securities market in order to meet international securities trading standards. For the first time in the history of the Vietnamese stock market, listed enterprises, public firms, and exchange-trade funds (ETFs) were given the right to co-operate with one or more market maker for these firms' securities.

Thanks to this policy, investors, especially those that have low liquidity or no liquidity at all, can easily create trade orders to purchase or sell securities products.

However, despite the brand-new policy mechanism regarding the connection between firms and market makers, no securities were recorded to meet the standards of creating a market.

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