Companies floating around in limbo land

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The companies are those which have already gone public, but deposited its shares at Vietnam Securities Depositary (VSD) instead of floating on the official markets.

Hanoi Construction Consultant and Investment Corp. (CCIC Hanoi) went public in 2005, but did not float on official markets. It then deposited its shares at VSD in 2009 as per State Securities Commission (SSC) requirements.

However, after the deposit, more than 200 company shareholders could not sell their holdings. VSD also forbids the company to certify any trading.

Nguyen Quoc Hung, chairman for CCIC Hanoi, said the company had not planned to float on official markets given the market downturn. “But, our shareholders are still demanding to trade the company’s shares and they are really discontented,” said Hung.

There are now 15 other companies in the same position as CCIC Hanoi, according to VSD data.

In Vietnam, companies are not obliged to float on official markets - the Ho Chi Minh and Hanoi stock exchanges - after going public. This has led to the fact that a vast number of public companies being established without market watchdog control. According to Hanoi Stock Exchange statistics, there are now some 3,000 public companies and up to 80 per cent, or more than 2,000 are on the unofficial market.

In a bid to manage those public companies and to make the nation’s market more transparent, the SSC required these companies to deposit all shares with the VSD since 2007. However, almost all of them chose to violate the law by floating shares freely. The market watchdog is yet to create a trading platform for those companies and is finding it tough to make these companies fall into line with regulations.

For several years, shares in thousands of public companies were traded via negotiations between sellers and buyers. Investors could also certify their stake ownership with the company if they wished to do so.

Last year, SSC asked VSD to draft a plan for establishing a trading platform for public companies which deposited shares in the depositary centre. Under this plan, investors would buy and sell via brokerage firms which are also members of VSD. The trading results would then be summarised at the end of the day and transferred to VSD for clearing.

Last week, VSD said it had completed drafting its plan and had submitted it to SSC. SSC spokesman Nguyen Son said the circular was still waiting for Ministry of Finance approval.

According to SSC, the circular was expected to come into force this July.