Will bourse be a capital attraction?

Bourse officials are banking on SMEs walking through its door

The authorities hope that an attractive environment would persuade more small- and medium-sized shareholding enterprises (SMEs) to sign up. As yet, only a handful of companies have registered to trade on the Hanoi Securities Trading Centre (HNSTC).
“Right now we cannot anticipate how many businesses will register to be traded on the HNSTC by 2007 or 2008 because it is a very difficult job. It all depends on the businesses’ wishes,” HNSTC director Tran Van Dung told Vietnam Investment Review.
At a press conference held in Hanoi last week, Dung announced a plan for the HNSTC development which would consist of two phases.
The first phase will take place from 2005 to 2007 or 2008, in which the centre will auction off equitised state-owned enterprises’ shares; bid government, municipal, corporate and project bonds; and trade unlisted stocks on a straightforward negotiation basis. After that, HNSTC will develop into an Over-the-Counter (OTC) market.
“Given the smaller sizes of companies due to trade shares in HNSTC compared with those being listed in the Ho Chi Minh City Securities Trading Centre, the Hanoi-based centre will need a lot of participants to be able to develop,” Dung said.
But this would be an ambitious target considering that only 26 companies have been attracted to list on the second city-based centre five years after it started operating, with just $240 million in combined capital.
The conditions for listing have been loosened for eligible candidates, particularly the 50 per cent slash of the initially required $70,000 capital, and the number of listed companies has increased, but slowly, resulting in a dull market.
Hesitation over the required auditing procedures and disclosure of information for shareholding companies is one of the main reasons hampering participation in the stock market.
Discriminative policies for listed companies are another factor holding would-be participants back.
“To attract more enterprises to list and trade shares on the stock market, [we] must remove the existing discriminative treatment to listed and [bourse-based] traded companies and other equitised state-owned enterprises,” said Vu Bang, standing deputy chairman of the State Securities Commission (SSC).
These policies involve capitalisation, credit and information disclosure while favourable conditions still exist for companies outside the stock market.
He also said in March the SSC would submit a proposal to the Ministry of Finance and the government, which would include incentives to offer enterprises registering on the bourse.
“To increase the number of participants, particularly in the early stage of the HNSTC’s operation, we have to introduce more enticing measures,” Bang said.
He said in the next two years, HNSTC would open an alternative pit to facilitate the trading of shares by shareholders in joint-stock companies that did not wish to register on the main stock exchange.
Tran Van Dung welcomed the idea and agreed that it was one solution that would help increase the number of companies participating in the HNSTC.
“Once the shareholders find that trading shares on the HNSTC is beneficial and safe, they will put pressure on the companies’ management boards and consequently the companies will register to trade on the stock market,” Dung said.