The Unlisted Public Company Market (UPCoM) on the Hanoi Stock Exchange (HNX) is effectively a mezzanine exchange, set up to encourage unlisted firms to participate in the securities market, with a view that those on UPCoM may later transfer onto the main market. UPCoM brings a number of benefits to investors. Transactions, clearance and settlement are all carried out through a centralised system, and investors are protected by a legal and regulatory framework. The exchange also has high standards of transparency and data accessibility, publishing information on constituent companies and trading to help investors make investment decisions. Investors can also use the HNX trading system and its network of registered securities companies to find counterparties to buy and sell securities.

For companies, inclusion on UPCoM boosts visibility and accessibility to investors, while being a useful step towards full listing, allowing them a platform to improve transparency and corporate governance to reach HNX standards. For the authorities, the market allows better regulation of over-the-counter trading, and helps in bringing more companies into the formal economy.

Growth Market

As of end-2016 there were 413 stocks on UPCoM, a significant rise from 256 in 2015. Total market cap was VND303.36trn ($13.6bn), a leap from VND61.03trn ($2.7bn) a year earlier. Total trading value reached VND31.95trn ($1.4bn), up from VND14.29trn ($639.3m) in 2015. “The market’s growth is a big success,” Nguyen Thanh Long, chairman of the HNX, told OBG. “The challenge now is to push more state-owned enterprises to list on UPCoM to improve their transparency, and then get them to a full listing.”

There were a total of 21 new listings on UPCoM in the first three months of 2016 alone, and by December, newcomers were arriving at a rate of one a day. This should help boost what have been rather low liquidity and thin trading volumes. Major recent listings include Vietnam Airlines, which debuted on January 3, 2017, with its 1.22bn shares listed with a starting price of VND28,000 ($1.25). The shares surged 40% within days of their release, with investors looking to tap into rapid air passenger growth in the region, and doubtless also with an eye on a potential future privatisation. The carrier’s listing is a boon for UPCoM, accounting for up to 11% of its total market capitalisation at one stage soon after its float.

The government has an 86% stake in the airline, with Japan’s ANA Holdings holding another 8.8%, meaning that the free float is a fairly small proportion of shares.

In October 2016 the government listed Hanoi Beer Alcohol Beverage Corporation (Habeco) on UPCoM, in preparation for a float on the Ho Chi Minh City Stock Exchange (HOSE). The brewer had a market share of 19.8% in 2015, according to press reports, down from 22% in 2013 and 2014. Danish brewing giant Carlsberg owns a 17% stake in Habeco, with the state holding some 82%. Habeco’s share price soared nearly 300% in the days after listing. In January 2017 its HOSE debut priced shares almost three times higher than on UPCoM, with 231m shares at VND127,600 ($5.71) each.

Banks On Board

In January 2017 Vietnam International Bank (VIB) made its debut on UPCoM, listing 564.4m shares at VND17,000 ($0.76) apiece, indicating overall market capitalisation of VND9.6trn ($429.4m). The bank said the listing was intended to improve transparency, market capitalisation and share liquidity, while improving access for investors. VIB is one of the country’s stronger banks. It made VND702bn ($31.4m) profit before tax in 2016, up 7% on 2015. It has a recent history of generous dividend payments, handing out 25% in 2015. Commonwealth Bank of Australia has a 20% stake in VIB, meaning that other foreign shareholders can take another 10% of the bank.

Meanwhile, another lender, Maritime Bank, also listed in January 2017, with 1.17m shares priced at VND3000 ($0.13) each, while Techcombank, VPB ank, OCB and Kienlong Bank have also reportedly submitted plans to the State Securities Commission for listing on UPCoM.