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A number of firms have listed on the STC but have not yet issued
shares to raise capital because they don't have new investment
projects. For example, Sacom has gross profits of approximately
20 billion dong annually. After paying taxes and dividends, we
still have about 9 billion dong in retained earnings. We
currently have about 35-40 billion dong for available for
re-investment, but don't have plans for new investment projects,
so why would we issue more shares to raise funds?
To increase the size of the stock market, I believe the
government needs to push large SOEs like General Corporations 90
and 91 to list, as these big firms are the ones that have large
investment plans, and therefore have a natural need to raise
medium and long-term finance. The government needs to somehow
increase the number of listed firms into the hundreds so that
the market becomes active; a stock market with only about twenty
listed companies doesn't mean much.
Mr. Do Van Trac -
General Director, Saigon Electric Cables Joint Stock Company
(SACOM)
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Most of the current
supply of Vietnam's stock market are equitized companies, which
is natural for a transition economy. The key to growing
Vietnam's stock market is the equitization of SOEs. If the
government does not take much bolder steps to equitize SOEs, the
issue of limited supply of stocks on the market will never be
resolved.
Mr. Tran Van Dung -
Deputy Director, Office of the State Securities Commission (SSC)
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Raising medium- and
long-term funding through the stock market is still new for
Vietnamese businesses, but the real issue is that this new
channel of funding has not yet brought them significant
benefits. In this current market, transparency and financial
disclosure is too high a price for firms to pay in order to be
listed, relative to what they receive in return; the purpose of
listing is to increase liquidity of their shares, but the level
of liquidity in the market is very low. To improve this
situation, the government can, through the State Bank of
Vietnam, play the role of a "market maker," by enacting measures
such as committing to discount securities, which helps investors
be assured of the liquidity of their investment. This has been
done by governments in other countries. For example, the
government of Japan has in the past used tens of billions of
dollars to purchase securities pledged as collateral at
commercial banks.
Mr. Ly Xuan Hai -
General Director,
Asia Commercial Joint Stock Bank Securities Company (ACBS)
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PJICO is a
joint-stock company, with seven major institutional shareholders
Petrolimex, Vietcombank, Vinare, VSC, Matexim, Hanel and AT
Company holding 80% of the equity, and thousands of individual
shareholders holding the remaining 20% of shares. After eight
years of operation, our paid-in capital and retained earnings
have reached 250 billion dong, almost 5 times the original
paid-in capital of 55 billion dong in 1995. At our recent
shareholders meeting, we agreed in principle that a company with
as many individual investors like PJICO must list eventually.
We don't intend, however, to list any time in the near future.
There are many reasons for this not just the unfavorable market
conditions at present. The stock market in Vietnam is very new
to investors, but also to the government regulators. As a
result, their policies seem to be more responsive to market
fluctuations; we don't really see that the government has a
clear long-term direction and thus are not confident enough to
proceed. An even bigger issue is the ability to manage
information in Vietnamese companies is still very weak and there
is a lack of corporate governance to put such a system in place.
For example, if we do not properly manage the information that
is publicized by and about our company, there is a high risk of
damage to our reputation if the public forms its opinion based
on information that is incomplete or inaccurate.
Mr. Tran Nghia Vinh
- General Director,
Petrolimex Insurance Joint Stock Company (PJICO)
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 The
size of the market needs to grow. Right now, when a company
needs money, it goes to a bank because there is no other
alternative. The market will not be able to bring companies that
need capital and investors together until it is big enough and
has enough investment options. The government needs push for
growing the size of the official stock market. I have three
recommendations to do so. One, the government should strongly
encourage companies to list on the stock market; two, allow
joint-stock banks to list; and three, conduct new equitizations
through the stock market. All of these measures can be done if
the government is determined enough.
Mr. Dominic Scriven
- Director, Dragon Capital Investment Fund
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