HNX employees monitor stock trades in their Hanoi office. (Photo: VNA) Hanoi (VNA) - A new set of regulationswill be imposed on companies either looking to be or already listed on theHanoi Stock Exchange’s (HNX) Unlisted Public Company Market (UPCoM),increasing the level of inspection and monitoring on these entities andpreventing investors from buying unqualified stocks by underperformingbusinesses.
The HNX issued the Decision 455/QD-SGDHN lastweek, which added two more notches to the discipline scales for listed companies.From now on, in addition to the previous penalties of temporary suspension ofstock trade and limitation on traded stocks, two more sanctions in the forms ofan initial reminder and an ultimate permanent ban from trading on the UPCoMwill be applicable for all companies across all categories.
The reason for this new addition for the UPCoM’sregulations is the rapid expansion of the stock market. In less than two yearsfrom December 2015 to June 2017, the amount of listed companies has increased by2.2 times, from 256 to 571 stocks. Market capitalisation is currently 440billion VND (19.6 million USD) and market’s liquidity is now 200 billion VND(8.9 million USD) per session.
As such, the actuality of listed companies onthe UPCoM has become much more complex, with charter capitals rangingfrom hundreds of thousands dollar to billions of dollar, with huge corporationssuch as the Airports Corporation of Vietnam, the Thermal Power Joint StockCompany in Hai Phong or the Vietnam Steel Corp.
However, this also means the quality of businessentities would fluctuate greatly across categories, from extremely high returnto hinging on the verge of severe loss. Under the situation, it is necessaryfor the authorities to increase the complexity of management and regulations,in order to improve transparency and protect investors on the market, hence theissuance of Decision 455.
Out of the four discipline methods, theslightest which is simply an initial reminder, is used for those who fail topublish their annual or biannual financial reports 30 days later than the HNX’sset date.
The next level of temporary trade suspension fora maximum of five sessions is applied should the company show any of thefollowing anomalies: suspicious fluctuation of stock price and amount traded,failure to publish the company’s annual financial report 45 days later thanrequired and annual general meeting’s minute six months since the end of thefinancial year, as well as withholding any changes in business performance.
The third discipline tier, limitation on stocktrade, is implemented in case the company’s owner’s equity drops below zero,its production ceases for more than one year, its latest financial report spotsany incongruence, its stocks become delisted or the company itself fails toamend the cause of its stocks’ delisting.
The final and most severe discipline method ofstock trade ban is reserved for any company that fails to identify itsheadquarter as the same address given in its business certificate, or anycompany exposed by the HNX and other authorities to have committed frauds intheir trade portfolio including false information affecting investors’decisions and violation of information disclosure regulations on the stockmarket.
Most recently, on June 28, 2017, the HNXannounced limitations on stock traded for seven companies on the UPCoM, inwhich they are only allowed to be traded during the weekly Friday session witha total amount of 91.2 million stocks, which equals to 912 billion VND (40.6million USD).
The HNX said they would allow these companies, whose stock codesare listed as PPG, TNM, MCI, MMC, DCI, PXI and HBI, to resume normal trading assoon as they fix the cause of their failure to publish the relevant informationregarding their company performance and financial reports.
Furthermore, the decision added to the existingregulations on stock price fluctuation to handle special cases in which newlylisted stocks’ referential price is the same as its ceiling and floor prices,or when the referential price is as small as 100 VND (0.004 USD).-VNA
VNA
