SCIC withdrawal stimulates markets

SCIC’s proposed withdrawal from listed companies should open wider room for foreign investorsPhoto: Le Toan

Tran Thang Long, head of research at Bao Viet Securities Company, said SCIC’s divestment process would have a positive effect on the stock market in both the short and long-term.

“It meets demands from foreign investors to participate more deeply in the Vietnamese stock market and underlines the Vietnamese government’s commitment to a sharp decrease in state involvement in non-essential sectors,” said Long.

According to the State Capital Investment Corporation’s (SCIC) restructuring plan recently approved by the government, the SCIC would reduce its ownership ratios in 376 companies including major players such as Vinaconex, Bao Viet Holdings, FPT, Traphaco, Binh Minh Plastics and Tien Phong Plastics.

The plan aims to redistribute state capital into key industries and help enhance the financial efficiency of the country’s state-owned enterprises through 2015.

However, he said that despite SCIC’s divestment plans, there remained little room in FPT, Binh Minh Plastics, and Tien Phong Plastics for foreign investors and therefore, the market would have to wait for the government to approve the draft decision to raise foreign ownership in listed companies to work in tandem with SCIC’s capital withdrawal.

The State Securities Commission recently submitted a draft decision to the prime minister governing foreign ownership limits in listed companies. If passed, the decision would allow foreign investors to own up to a 60 per cent stake in listed companies, although this would still require approval from the prime minister. The draft decision would replace Decision 55, passed in April 2009, which puts a 49 per cent cap on both individual and institutional investor ownership in public or listed companies, investment funds, and securities and fund management companies.

Long added that SCIC’s divestment list included firms that boasted good performances on the HoSE and HNX, and therefore it was likely that SCIC’s capital withdrawal would be carried out through an agreement transaction method to avoid a huge flood of stocks appearing in the market.

Meanwhile, Pham Ngoc Bich, head of institutional clients at Saigon Securities, said another positive effect of SCIC’s capital withdrawal was that it would open up a large amount of good quality shares.

He added that many of the shares that the SCIC currently holds had not been traded, so the withdrawal would help boost market liquidity.

Under the restructuring plan, the SCIC would continue to maintain long-term investment in Vinamilk, FPT Telecom, Hau Giang Pharmaceuticals, and the Vietnam National Reinsurance Corporation (Vinare). SCIC will also retain a 100 per cent stake in SCIC Investment, An Giang Quarry and Processing Company, and Vinaconex Investment and Mineral Trading Company. SCIC will also retain a controlling stake in Dien Bien Services, Tourism and Trading Company, and Lai Chau Mineral Company following equitisation.

By 2015, SCIC’s charter capital would be raised to VND50 trillion ($2.38 billion) from its current VND5 trillion ($238 million).