September 23, 2017 20:07

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10 highlights of Viet Nam stock market in 2016

10:03 | 05/01/2017

VCN - Securities Journalists Club (SJC) has listed 10 highlights of the Stock market in 2016.

10 su kien noi bat thi truong chung khoan nam 2016 Amend the Securities Law, open the Derivatives market
10 su kien noi bat thi truong chung khoan nam 2016 Tightening stock market management in order to absorb foreign capital inflows
10 su kien noi bat thi truong chung khoan nam 2016 A lot of potential for Vietnam's stock market

10 su kien noi bat thi truong chung khoan nam 2016 Representatives of Government, Ministry of Finance and the State Securities Commission and market participants are ringing the bell that marked 20 years celebration of Vietnam stock market. H.V

1. 20 years Imprints Securities sector

In 28-11-2016, the State Securities Committee celebrated the 20th anniversary of the securities traditional day and received 2nd Independence Medal.

In the past 20 years, Vietnam has built a smoothly running stock market, including Stock Exchanges (HSX and HNX), with more than 1,000 listed companies which took stocks on centralized trading with listed stocks capital size over $US 70 billion, attracting 1.6 million investors domestic and from abroad.

During the last two decades, the Viet Nam stock market raised over 2 million billion VND investment capital for the development of enterprises and the country. And about 4,000 enterprises have made public auctions for selling shares to the public through Viet Nam stock market.

2. In the year of "black swan" and sudden shocks

In 2016, the Viet Nam stock market witnessed sudden shocks from outside which made the strongest impacts ever. These events were just thought of as possibilities by very few investors, such as: China stock market interrupted on 1st April, British left EU ( Brexit) on 24th June, the US presidential election results on 9th November.

Mostly, these events had a strong impact on the Viet Nam stock market and led to sell-off activities, even from outside shocks. On 24 June, the VN-Index plunged 5.47%, the deepest drop was 3% on 9 November. However, due to the good foundation, the market recovered after that.

3. Since the IPO to the stock exchange - the shortest route ever

In 1-11-2016, Circular No. 115/2016/TT-BTC officially took effect. Accordingly, only after about 20 working days from the date of expiration of payment for the purchase of shares via auction, investors who bought shares at auction are be able to trade on UPCoM market. Thus, the path from post-IPO on the stock exchange has been greatly shortened compared to 90 days as stated previously.

Along with the improvement of administrative procedures to help enterprises to reduce the listing time on the stock exchange, coercive sanctions for delaying the post-IPO listing on the stock exchange had been revised in a stricter direction. On 1-11-2016, the Government issued Decree No. 145/2016/ND-CP on amending and supplementing Decree No. 108/2013/ND-CP on administrative penalties on the stock market. One of the most notable content in Decree No. 145 is the modified penalty framework for acts of late filing public company registrations which affects the rights of shareholders, transparency in operation and management of public companies. The fines are corresponded to the nature and seriousness of the violations, in which, the highest is 400 million VND fine imposed for "late listing" for over 12 months.

4. Launched a common stock index, the beginning of a consolidation roadmap of 2 Stock Exchanges

In 24-10-2016, the VNX-AllShare index was officially opened and was the first basis index which connected the current listing Stock Exchanges (HSX and HNX). This is one of the milestones on the path of consolidating 2 Stock Exchanges in Vietnam.

The establishment of the VNX-AllShare common index was highly appreciated by foreign and domestic investors, because so far, the 2 Stock Exchanges in Vietnam operated independent indexes. The current index of each is measuring the securities fluctuations in its own and there are no indicators to measure the overall volatility of the index in the whole Viet Nam stock market.

However, after the common index launching, the merging of 2 Stock Exchanges is still awaiting the official decision of the Government. Merging 2 Department of Securities Exchanges Vietnam will help the market to be uniformly organized, making the size of the total market capitalization in Vietnam and is one of the favorable factors in the upgrade road of Vietnam stock market.

5. Realizing the determination of State capital divestment.

In 12-12-2016, competitive offer session of 9% share of Viet Nam Milk Company - Vinamilk (VNM) took place in Ho Chi Minh City Stock Exchange, which was represented by the State Capital Investment Corporation (SCIC). Accordingly, 78,378,300 shares of VNM, equivalent to 60% of the shares offered for sale, were sold to 2 foreign investors.

With the price at 144,000 VND per share, the State revenue was 11,286.5 billion VND after selling 5.4% share of Vinamilk. Although sales volume was not to expectation, the price of transactions reached 144,000 VND per share, 7.7% higher than the closing price of the offering date, the first divestments deal of SCIC at Vinamilk was considered asa typical acquisition of 2016 (the largest value of transactions in Southeast Asia in 2016 at $US 500 million)

Following Vinamilk, the State groups and corporations such as Sabeco, Habeco, Vinatex, have been putting shares onto the stock exchange in order to divest in a transparent and efficient way.

The first VNM share offering by SCIC was higher than market price by 7%.

6. Surprising ROS in Stock market

In 2016, the ROS stock of FLC Faros Construction (Faros) not only attracted the attention of the Viet Nam media, but also aroused the curiosity of the international finance media including The Wall Street Journal.

Just type the phrase "stock ROS", Google instantly pop up to 290,000 results in 0.34 seconds only with information and comment on this stock. Established since 2011 with charter capital of 1.5 billion VND, after 5 years, the charter capital of ROS rose to 4,300 billion VND.

Since the listing, the ROS share price rose from 12,600 VND in 1/9 to 126,000 VNDin 25/11 - 10 times in just over 3 months of listing, put the stock into TOP 10 of stocks with the largest capitalization in Viet Nam stock market.

7. MTM and a shock for the stock market

16-09-2016, Security and Investigation Agency - Ministry of Public Security decided to prosecute a criminal case, "Tran Huu Tiep jointly defrauded and appropriated property" which occurred in Ha Noi and other provinces. 19-09-2016, This Agency issued the prosecuting Decision, enforcing the arrest warrant for temporary detention to Tran Huu Tiep - Chairman of Central Mines and Minerals import and export Corporation (stock: MTM- UPCoM).

Earlier, on 20-6-2016, the Hanoi Stock Exchange (HNX) decision to force 31 million shares of MTM to be suspended from trading in UpCom with reason of protecting the benefit of investors.

At the time of suspension, the stock price of MTM was only 2,600 VND, a loss of 80% of the first listing price.

With the case of MTM, the market for the first time witnessed an emerging type of risk. This is the ability of intentionally defrauding when listing a company that was no longer active, with no real assets on the stock exchange, taking advantage of the facilitating provisions, for self-interest.

This risk has posed problems for better monitoring of UpCom Stock Exchange, especially when the growth of this market is very fast. After 7 years of operation, as of 16-12-2016, UPCoM has 394 registered trading enterprises. With the current growth rate, it is forecasted that the market capitalization of UpCoM could reach nearly $US 13 billion, and expected to be double the today HNX's (about $US 7 billion).

8. The derivatives market - ready for launch in 2017

In 16-3-2016, the HNX and VSD announced the model and plan to develop the trading systems and clearing statement of derivatives.

Opening by Decree 42/2015/ND-CP, which is detailed by Circular 11/2016/TT-BTC, the legal framework for the derivatives market was essentially completed. By the end of 2016, the preparations were completed, ready for the official derivatives market operation in 2017.

9. Government bonds - another great year

Government bond markets in 2016 consecutively set more impressive records: The primary market which recorded a great mobilization up to 281 trillion VND. Never like this year, by mid-September only, the primary mobilization of government bonds had finished the adjusted annual plan (250 trillion VND).

Another success of the government bond market in 2016 was the mobilization term being consecutively extended. Although Resolution 99/2015/NQ-QH allowed to issue an additional term of 3 years, but this year is the year that the long term, ultra-long term (20 and 30 years) were really impressive. By the end of 2016, the average loan term of government bonds reached 8.27 years, bringing the average maturity of government bonds portfolio to 5.63 years (1.19 years higher than the average Government bond term by the end of 2015, which was 4.44 years).

Along with the sharp decrease of interest rates (with 5 years maturity lower than 5%/year, fell by 175 basis points over the same period, from 6.65% to 4.9%/year), the extension of the loan term meant a lot to the restructuring of government debt which is towards extending debt repayment, and reducing pressure on the "peak" of short-term debt and the cost of raising capital.

2016 was also the year which recorded the excitement of the secondary government bond market. Not before had the total trading amount of government bonds reached 1.5 million billion VND, and the average session value of over 6,200 billion VND. Along with that, the volume of repo transactions was much larger proportionally, a proof that the market has a strong growth in depth.

10. Loosen room for foreign investors: Switch "the solution" to 2017

More than one year after the Government issued Decree No. 60/2015/ND-CP on the new points of loosening room. In fact, the number of enterprises which enforce this is small.

The most "stuck" point in implementation the Decree on loosening room was located in the Investment Law because enterprises that own more than 51% of foreign capital will be "treated" as foreign investors. Enterprises faced with the provisions on the rate of 51% because they are forced to consider, if they decide to loosen room and foreign investors buy over half of shares then the enterprise will become a foreign legal entity.

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In fact, listed companies should consider the loosening room and the Investment Law because the current regulations on the stock market to allow foreign investors to buy up to 49% of enterprises capital. The threshold of 49% and 51% is too small, but the legal situation of enterprises have a big difference, because if the enterprise is a subject of foreign investors, many procedures concerning taxation, investment, and credit will have to comply with the provisions of foreign investors.

How can we solve the room loosening problem on the stock market is the question in 2017 when the new Investment Law was enacted, and the Securities Law (the equivalent legal document), is expected to submit to the Congress by the Government in 2018 as the 2nd generation of Securities Law.

By Hong Van / Tuan Cuong