Foreign ownership ratio in listed firms may rise to 60%

VietNamNet Bridge – The State Securities Commission (SSC) has submitted to the government the plan on raising the ceiling foreign ownership ratio, which aims to encourage the transactions on the stock market.

Foreign ownership, listed firm, ssc

The information has been confirmed by Vu Bang, Chair of SSC. Prior to that, the Ministry of Finance, Stock Exchanges and relevant bodies all expressed their agreements with the plan.

What will happen on the stock market, if the suggestion gets approval?

The watchdog agency hopes that a higher ceiling foreign ownership ratio in listed companies would help improve the liquidity in the market. This would also help attract more foreign investment, a more important goal.

If the government gives the nod on the proposal, the currently applied ceiling foreign ownership ratio of 49 percent would be raised to 60 percent which would bring big changes to listed companies.

Analysts have warned that the higher foreign ownership ratio would mean higher risks for the Vietnamese listed companies of being taken over by foreign companies. The risks prove to be higher for the enterprises in which foreign shareholders hold tens of percent of shares.

In Bibica, for example, the foreign strategic partner holds 38 percent of stakes, and it would easily increase its control over the business operation once the allowed ownership ratio is raised.

As for the listed companies, in which the foreign ownership ratio has hit the ceiling, the partners can also easily acquire the control by buying shares from finance investors.

Big changes are expected to take place in the enterprises where foreign partners hold the control.

However, as Nguyen Thanh Chung, General Director of AAS, a securities company pointed out, it would be not as easy as “swallow candies” to take over domestic enterprises.

Chung said the 51 percent ownership ratio is not the decisive factor. The ratio just allows the stake buyers to have additional members of the board of directors and make decisive voice in the enterprises’ business decisions.

Meanwhile, they need the ownership ratio of 65 percent or 75 percent in accordance with the Securities Law and the enterprises’ regulations to make the decisions vital to the enterprises, including the decisions on the chartered capital and stockholder equity increase or decrease, dissolution or merger.

Chung believes that only the foreign big conglomerates want to take over Vietnamese enterprises. However, their targeted enterprises need to be very good at business and have big business scale enough. Meanwhile, there are not many such enterprises.

“Offering more room to foreign investors in Vietnamese enterprises is just the solution that bring to foreign investors more opportunities to buy more stakes,” Chung commented.

Meanwhile, Hoang Thach Lan, who once worked at the HCM City Stock Exchange, does not think the SSC’s proposal, if approved, would help much.

He said in fact, some foreign enterprises and individual investors have been holding more stakes than they are allowed to hold (49 percent), though the stakes, on papers, under others’ names.

The solution would help improve the liquidity in the enterprises with big business operation scales. However, the foreign ownership ratios in such enterprises, including Vinamilk, Kinh Do, have hit the ceiling already.

K. Chi

Foreign ownership, listed firm, ssc