Up to now, lagging legal regulations have held FDI firms back from their listing plans in the country. Last year alone, there were at least four such companies applying to list on the Ho Chi Minh City Stock Exchange (HoSE) while two more aiming at the Hanoi bourse.
Among them, the world’s leading manufacturer in gardening tools Taiwan’s Fortress Tools JSC originally wanted to go public last year but market conditions, as well as regulations, were not yet supportive.
The same was seen with South Korea’s Seoul Metal Vietnam, a Samsung contractor. Following its listing on the over-the-counter platform in 2017, the company has showed its interest in listing on the HoSE, but lack of regulations has postponed the company’s plan until now.
The regulatory delay hurts the firms’ chances of raising capital in the country, while also negatively affecting the budding image of Vietnam’s market as an open and welcoming destination for foreign investors.
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 made their debut on the public market. Some speculated that although the general cap has been lifted, the 49% limit on conditional sectors may have hindered foreign corporations.
Changes need scrutiny
It was believed if the government changes the legal framework to allow FDI businesses to list their stocks, many more-foreign investors will join the local stock market both by investing in Vietnamese companies or listing their own businesses. The brokerage has been active in promoting the country as both the listing and investing destination for foreign companies.
Foreign investors have been choosing Vietnam not only to set up production bases, but also to list their shares. This is good news for Vietnam, which wants foreign investors to retain profits in Vietnam for re-investment in the country, some experts said, adding the investors’ decision also show the attractiveness of the Vietnamese stock market.
However, some others are also concerned about the listing of FDI firms, saying that FDI firms only list their stocks to divest from Vietnam more easily if they need to. Therefore, the SSC will need to tackle
Tran Dinh Dung, head of the Underwriting and Financial Advisory Department at Saigon-Hanoi Securities, said that the SSC 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.
However, Tran Thanh Tung, lawyer at Phuoc & Partners, argued if an FDI firm wants to exit Vietnam, closing up its business as a limited company is more practical and straightforward than as a listed entity.
Regarding the foreign cap restriction, Dung said that the current limit affects both Vietnamese and FDI firms equally. He explained if the foreign business is in manufacturing and other non-conditional sectors, there will be no foreign ownership restriction at all. On the other hand, if it operates in conditional sectors such as real estate or banking, the foreign entity will indeed be subject to the same cap like listed Vietnamese banks and real estate developers.