It is becoming an urgent need to scrutinize the legal framework related to the listing of foreign-invested firms in Vietnam’s securities market as the lagging regulations have held the firms back from their listing plans.

A large number of foreign firms wish to be listed on Vietnam’s stock exchanges.

Though the government issued Decree No.38/2003/ND-CP ordering several foreign direct investment (FDI) firms to shift from the limited liability company to the joint-stock company model and Decision No.238/2005-TTg setting a target participation rate for FDI firms in the Vietnamese securities market, there have been less than 10 FDI firms listed on the local stock exchanges during the past 16 years.

According to lawyer Tran Minh Hai, director of law company Basico, a large number of foreign companies wish to list shares on Vietnam’s stock exchanges, but they have decided otherwise due to the lack of specific regulations on listing.

It was the case of South Korea’s Seoul Metal Vietnam, for example. Following its listing on the over-the-counter (OTC) platform in 2017, Samsung’s contractor has showed its interest in listing on the Ho Chi Minh Stock Exchange, but a lack of regulations has made the company postpone its plan until now.

Besides the lack of detailed guidance, experts said Vietnam’s laws on foreign ownership may have deterred overseas investors from joining the market.

Even after Decree No.60/2015/ND-CP on implementing the Law on Securities scrapped this limit in 2015, few FDI firms float their shares. Some speculated that although the general cap has been lifted, the 49% limit on conditional sectors may have hindered foreign corporations.

According to experts, the regulatory delay hurts the firms’ chances of raising capital in the Southeast Asian country, while also negatively affecting the budding image of Vietnam’s market as an open and welcoming destination for foreign investors.

Close supervision

It was believed if the government changes the legal framework on FDI businesses’ stock listing, many more foreign investors will join the local stock market both by investing in Vietnamese companies or listing their own businesses.
That will be good for Vietnam as foreign investors have been choosing Vietnam not only to set up production bases, but also to list their shares. The investors’ decision shows the attractiveness of the Vietnamese stock market besides helping the country retain the investors’ profits to re-invest in the country.

Moreover, according to Hai from Basico, paving the way for FDI firms to list locally would help supervise their performance as the companies would be managed by not only local authorities but also investors, shareholders, and the local stock exchanges.

However, to better manage the listed FDI firms, experts said that the government should carefully review FDI firms’ commitments before licensing them to be listed on the local stock exchanges. Specifically, local policymakers should clarify requirements such as the operation timeline in Vietnam; the levels of growth in output, revenue, and annual profit; and the rate of technology transfer, among others. This would help a lot in selecting strong FDI firms to participate in the Vietnamese securities market.

To more effectively supervise FDI firms’ listing activities, policymakers should also issue regulations about the timeline big shareholders are not allowed to sell their acquired stocks as some are concerned that FDI firms only list their stocks to divest from Vietnam more easily if they need to.

Tran Dinh Dung, head of the Underwriting and Financial Advisory Department at Saigon-Hanoi Securities, said that the State Securities Commission, the local stock market watchdog, needs some more detailed rules on whether the founders of FDI firms can divest from their companies, as this is related to the matter of capital outflow from Vietnam.