Interview: Trinh Thanh Can
What effects can we expect from new regulations in Vietnam, such as Decree 60?
TRINH THANH CAN: Decree 60 is a legal breakthrough that relaxes the foreign ownership limit for listed companies. It was expected to encourage new foreign institutional investor funds to invest in the listed market and help upgrade the Vietnamese equity market. It showed the government’s determination to open up the capital market, but it was not a complete legal solution. Listed companies that do business in one of the 221 restricted industries cannot extend their foreign ownership to above 49%. Moreover, for other listed companies, if foreign ownership goes above 51%, the company will be treated as a foreign company in Vietnam, which means a lot of operational restrictions.
Over a year since implementation of the new regulation, only 12 listed companies have raised their foreign ownership to above 49%. For some companies legal risk is a big issue. A listed company with foreign ownership of 51% or more will face a legal grey area. Legal risks, operational constraints and anti-merging are the top reasons listed companies give for their resistance to removing the foreign ownership limit. The Ministry of Finance and the State Securities Commission (SSC) are aware of the issues, and we will see changes to regulations in 2017.
How can the government encourage listed firms to disclose financial information?
CAN: Information disclosure from listed companies has gradually improved, though it is still far from investors’ expectations. Financial reporting quality, especially among the big companies, is much improved. Since the beginning of 2016 the SSC has required listed companies to publish their financial statements 15 days faster. It now takes only 20 days for investors to have quarterly financial statements and 45 days for audited annual reports. The problem lies mostly in reporting quality and law compliance. Despite the existence of strict laws, information disclosure violations and fraudulent reports are not punished appropriately and this negatively affects the image of Vietnam’s capital market. We expect big improvements and changes in 2017.
Which sectors will see major investment in 2017?
CAN: Foreign investors in Vietnam should have significant opportunities in 2017. With a focus on improving efficiency, the government is pushing the privatisation process more strongly than ever. We expect big initial public offerings, auctions and strategic sales of Mobifone, Vietnam Airlines, Sabeco, Vinataba, Hapro, Petrolimex, PV Power, PV Oil and others. Big private corporations are also going public. With such big issuances, primary and unlisted markets are still the most attractive ones. With strong GDP growth aligning with retail revenue and asset accumulation, consumer goods, services and property are the most profitable and attractive sectors, with strong growth and sustainable profits. Despite strong recent growth, most of Vietnam’s consumer markets are underdeveloped, especially in secondary cities that are growing at double-digit rates.
What effect would MSCI upgrading Vietnam’s status from frontier to emerging have?
CAN: That is among the boldest goals that the government set for the SSC and other authorities. The goal of being upgraded to an emerging market by 2018 is very challenging as we still have much work to do. The current improvements will gradually expand the investability of the listed equity market, and we will attract more and more foreign investors over time. With strong commitment from the highest levels of the government, I would not be surprised if the portfolio investment value increases by five to 10 times its current level by 2020. If we can be upgraded by then, we can expect significant growth to follow.
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