Workers from the Lai Chau Power Company check power transmission lines in Nam Nhun district. (Photo: VNA) Hanoi (VNS/VNA) - The successful equitisation and capital divestmentof State-owned enterprises (SOEs) would create benefits that boostedthe stock market and business performance, experts have said.
According to analysts from brokerage firm Yuanta Securities Vietnam,State capital divestment from unlisted enterprisesthat transferred governance to private units would help simplifythe listing process.
“If the stock market is for both buyers and sellers, we haveto promote the development of both sides,” experts from Yuanta said.
Regardingthe sellers, the greater the number of businesses participating in the market,the larger the market size would become, they said.
Investors,as a result, would have more options. Equitisation and divestment of SOEswould give the market more stocks with good asset quality and largecapitalisation scale, thus drawing more investors which wouldimprove market liquidity, they said.
From 2007-08and 2015-16, when divestment and equitisation was promoted bythe Government, the average stock market liquidity in 2009 skyrocketed by 226percent compared to 2008, reaching 1.6 trillion VND per session. Nearly 10years later, in 2018, liquidity reached 5.25 trillion VND per session.
At present, the foreign ownership ratio in existing stocks is almost fullyoccupied. If there are no more attractive new investment opportunities, foreigncash flow pouring into the market will gradually narrow.
Accordingto Do Bao Ngoc, Deputy General Director of Vietnam Construction SecuritiesJoint Stock Company, the promotion of divestment and equitisationwould make it feasible for Vietnamese stock markets to upgrade to anemerging market level from the current frontier market classification.
“The scale of the market will be expanded with increases both in the number oflisted companies and market capitalisation,” Ngoc said.
“For businesses, they will gain more trust among investors with moretransparency in corporate governance, shareholder diversification and largerinvolvement of strategic shareholders,” he said.
“Thecapital collected through divestment would also help the Governmentnurture public investment, thereby boosting the economy and creating afavourable environment for businesses to develop.”
Ngoc saidthe divestment plan for 2017-20 had not been reached for various reasons.
“Divesting from all the 92 SOEs targeted in 2020 seems to be an impossibletask and requires more detailed plans for the latter stages of the divestmentprocess,” he said.
“Divestmentat small and medium-sized enterprises often draws little attentionfrom investors. In many cases, when the State offers a share auction, nosingle investor registers to participate as they tend to place higher concernon large-scale enterprises with effective operations, but this group onlyaccounts for a small amount,” Bao said.
According to Le Duc Khanh, director of the market strategy department atPetroVietnam Securities (PSI), in 2020, the divestment process could stall asthe stock market had been negatively affected by diseases and economicdecelerations, with GDP forecast to decline.
“It might not be until the beginning of 2021, but the divestment process couldaccelerate when the stock market starts to recover,” the expert said.
In somecases, the Government needs to approve divestment plans based on actual marketdemand. Therefore, the stages of supervision and approval need to becareful and transparent, Ngoc said.
From2016 - 2019, only 36 out of 128 enterprises were equitised, meeting 28 per centof the plan,
Theremaining 92 firms have been instructed to get moving in 2020./.
VNA
