The five policies that influenced the stock market the most in 2015

Wednesday, Dec 30, 2015 09:05

The performance of Viet Nam's stock market has been relatively stable this year, sustained by a string of policies to ensure solid development in the medium and long term.

The volatility in the global stock markets following China's stock rout and capital outflow from emerging markets due to the US interest rate hike had a negative influence on the domestic market.

Against this backdrop, many measures and policies have been put in place to stabilise the market, improve transparency and attract foreign investments.

The benchmark VN-Index on the HCM Stock Exchange has risen 5 per cent so far this year while the HNX-Index on the smaller exchange in Ha Noi has fallen 5.8 per cent.

The financial website has highlighted five policies which affected the stock market most in 2015.

1. Decree 60/2015/ND-CP on easing foreign ownership limit in securities market.

Decree 60, dated June 26, allowed foreign shareholding ratio without a limit in public companies which are not subject to conditional businesses. It also lifted the cap on foreign investments in government and corporate bonds.

Taking effect on September 1, 2015, this new regulation was seen as a breakthrough for Viet Nam's stock market which would boost liquidity and create more attractive investment opportunities for foreign investors. This was also a necessary step to upgrade the Vietnamese market status from a frontier market to an emerging market.

In mid-August, the Ministry of Finance issued Circular 123/2015/TT-BTC providing guidance on foreign investment activities in Viet Nam's securities market with many administrative reforms and procedures to raise ownership ratios for foreign investors. However, the most-anticipated list of conditional business sectors was not published.

Until then, only Saigon Securities Inc. had been approved for raising foreign ownership limit to 100 per cent as per Decree 60 by the State Securities Commission.

2. Circular 36/2014/TT-NHNN impinges on short-term funding in stock market.

The circular, effective on February 1, 2015, set safe operational limits and new ratios of credit institutions and branches of foreign-owned banks in Viet Nam as well as put limits on stock investments and set conditions for banks to be able to give loans.

This regulation set tougher conditions for stock funding when it set a limit of 5 per cent of a bank's charter capital to finance stock investments (both listed and unlisted). Under the old rule, the limit was 20 per cent of charter capital.

It also defined which banks were qualified to extend credit to fund stock investments and one of the most stringent criteria was that the ratio of non-performing loans must be reduced from 5 per cent to less than 3 per cent.

In addition, bank loans to stock investments could be secured by the same stocks financed by that loan. One bank may also not invest in more than two other banks and the ownership in each bank could not exceed 5 per cent.

3. State Capital Investment Corporation to divest capital from 10 big companies

In October, the State Capital Investment Corporation unveiled plans to sell the entire State capital in 10 big State-owned enterprises, which could garner the State budget earnings of about US$4 billion.

These target companies included leading companies in their industry such as dairy giant Vinamilk (VNM), software producer FPT Corp (FPT), Bao Minh Insurance Corp (BMI), and Tien Phong Plastic Co (NTP), apart from Binh Minh Plastic Co (BMP).

Though the divestment timetable was still unclear, this was considered a huge opportunity for both domestic and foreign investors to buy quality products on the stock market.

4. Circular 180/2015/TT-BTC on registration for unlisted public companies

Circular 180, dated November 13 by the Ministry of Finance, shortened the registration time for trading of unlisted securities. Taking effect on January 1, 2016, it is expected to improve corporate transparency and bring more quality products into the securities markets.

According to the new rules, public companies which are not eligible for listing on the two stock exchanges, delisting or equitised enterprises must register for trading in the Unlisted Public Company Market (UPCoM) system within 30 days from the date of completion of the registration of a public company.

Within 30 days of the closing day of the initial public offering, unlisted public companies or equitised enterprises must register for trading in the UPCoM system.

5. Increased daily trading band on the UPCoM system from 10 per cent to 15 per cent and shortened securities settlement cycle

Data on the Ha Noi Stock Exchange showed that the expansion in daily trading from 10 per cent to 15 per cent in the UPCoM system, effective on July 1, 2015 had helped increase trade.

Meanwhile, the settlement cycle for securities transactions had been officially reduced from the current three business days (T+3) to two (T+2) after the trade was executed, effective from January 1, 2016. This new regulation was expected to boost trade and increase liquidity in the domestic securities market. — VNS

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