Vietnam (VNINDEX) plans to ease rules on equity trading and accelerate initial public offerings of state-owned companies this year to attract investors to a market that’s valued almost 15 times less than Singapore’s.
The State Securities Commission is preparing to cut the minimum holding period for stocks, Nguyen Doan Hung, vice chair of the commission, said in an e-mailed response to questions from Bloomberg on August 2. The regulator is also considering widening stock trading bands and starting an online auction system to boost volumes and speed up sales, he said, without specifying when the measures may be started.
“These are the right steps to make the market more competitive and as attractive for traders as its regional peers,” Attila Vajda, a broker at ACB Securities Ltd, the nation’s third-largest brokerage, said in an interview.
Vietnamese stocks are valued at $37 billion, compared with $552 billion in Singapore, Southeast Asia’s largest market, even after the benchmark VN Index jumped 19 percent this year. The value of stocks changing hands on the HCM City Stock Exchange slumped 40 percent last month from June. Vietnamese companies raised about $10 million from IPOs in the first half of this year, while Malaysia’s IHH Healthcare Bhd. raised $1.98 billion in an IPO in July.
The VN Index is the third-best performer in Asia this year, rebounding from a 27 percent loss in 2011 amid speculation the central bank would ease monetary policy to bolster growth. The gauge is valued at 9.9 times estimated profit, from a record low of 7 times in January. The MSCI Emerging Markets Index traded for 10.4 times on August 3.
The value of Vietnam’s equity market has jumped 40 percent this year, the biggest expansion after Venezuela, according to data compiled by Bloomberg. Malaysia’s market is valued at $432 billion and Indonesia’s $407 billion, while Japan, Asia’s biggest market, is worth $3.48 trillion. Vietnam’s stock market is classified by MSCI Inc. (MSCI) as a frontier market, which denotes an average stock-market value of about $27 billion.
To help lure investors, the State Securities Commission wants to cut the minimum period investors must hold shares to two days from three days by the end of this year, and reduce it further to one day next year, said Hung. The limit on daily share-price gains or losses may be widened from 5 percent on the main HCM City exchange and 7 percent on the Hanoi Stock Exchange, he said.
“Wider bands would help increase circulation of stocks in the market, bringing more trading options,” Giang Trung Kien, Hanoi-based head of research at FPT Securities Joint-Stock Co. said by phone on July 31. “Liquidity would definitely rise.”
The government said on July 24 that it will lift from September 15 the amount of registered capital companies must have to list on Vietnam’s exchanges in a bid to improve the quality and size of publicly traded equities.
The combined value of stock changing hands climbed 65 percent this year through August 1 from the same period last year. The total slumped to 14 trillion dong ($671 million) last month on the HCM City Stock Exchange, from 23.45 trillion dong in June, according to data from the bourse.
The VN Index has fallen 14 percent from a May 8 peak as data on June 29 showed Vietnam’s gross domestic product grew 4.38 percent in the first half, compared with 5.63 percent a year earlier. The government’s deputy minister of Planning and Investment Cao Viet Sinh said in June that full-year expansion may be as low as 5.2 percent.
The value of Vietnamese IPOs sank by 50 percent in the first six months of 2012 from a year earlier to a combined 206 billion dong, Hung said.
Companies from Graff Diamonds Corp. and Vietnam Airlines Corp., Formula One and Manchester United Ltd have shelved or postponed planned IPOs in Asia this year amid equity-market volatility. Bank for Investment & Development of Vietnam, the country’s second-largest bank by total assets, delayed listing its shares until no later than September 30 from its planned June 26 debut, the lender’s deputy general director Pham Quang Tung said June 19.
“Because of unfavourable macro conditions in the early months of the year, when the economy showed signs of slowing and businesses faced a lot of difficulties, companies found it hard to raise funds through share sales,” Hung said.
Vietnam’s stock exchange in HCM City started trading in 2000 with shares of four companies that began as state-controlled businesses. The first private company was listed four years later and a second bourse in Hanoi opened in 2005. The two exchanges now have about 700 stocks.
As well as easing rules on trading, the regulator wants the nation’s two exchanges in Hanoi and HCM City to set up online auction systems to speed up IPO activity, Hung said. Currently, investors taking part in IPOs have to register bids with securities companies, which take the offers to the exchange to input into its system.
“An online system would help shorten the auction time and save time for investors, making IPOs more attractive,” Nguyen Thi Hoang Lan, deputy general director of the Hanoi Stock Exchange, said by phone on August 1. “Now investors are still doing it manually.”