Oct 14, 2012

Vietnam - Gloomy stock market prompts listed businesses to hurry away

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VietNamNet Bridge – Not only small and unprofitable businesses, but big and healthy enterprises have also run away from the stock market, which is considered an effective long term capital mobilization channel.

The strange moves by the big guys

In late October 8, 2012, the HCM City Stock Exchange HOSE released a notice about the decisions by Godaco Seafood shareholders’ meeting on the voluntary delisting from the bourse.

The shareholders’ meeting approved the plan on delisting all the shares now listed at HOSE and authorized the board of directors to buy back all the shares from small shareholders, at 50,000 dong per share. Godaco’s shares were traded at 46,000 dong per share on October 8.

AGD, a big profitable business, has also decided to delist its shares from HOSE, though it did not mention the reasons behind the decision in official notices, while AGD seems to be not ready yet to provide the information to investors.

Observers in recent days have repeatedly warned about the movement of listed companies running away from the stock market.

Just some days ago, they believed that only unprofitable businesses, which did not want to expose their bad financial situation to the public, would withdraw fro the market. However, they seem to be wrong: even profitable businesses now also consider quitting the bourse.

Mekophar, a pharmacy company, is one of them. Like AGD, Mekophar left the stock market on July 12 when its business was prosperous and the company share was priced at 45,000 dong per share.

The 2012 shareholders’ meeting of Vinafco, a freight and forwarding company, also came to the conclusion on delisting 34 million shares from HOSE, even though Vinafco’s business has been going very well and the profit has been on the steady rise.

Other big names in their business fields like SQC or IFS are also considering the possibility of delisting shares. The movement of running away from the stock market has raised big worries.

More harm than good?

In case of AGD, the decision on delisting was really a surprise to investors. Meanwhile, as for Mekophar, delisting proved to be the only choice.

In fact, Mekophar thought of the delisting more than one year ago. The story began from the fact that Mekophar, when re-registering its business, was not allowed to wholesale and retail medicine products, because Mekophar was the enterprise, where foreign investors held 4.7 percent of stakes.

The removal of Mekophar’s right to distribute pharmacy products would seriously affect the business of the company, while it needs to retain the right no matter what.

In this case, Mekophar has only one choice – leaving the stock market – as the result of the unclear regulations about foreign invested enterprises.

Meanwhile, VFC left the stock market simply because it cannot see any benefits from the listing. Golden Age, which holds 25.25 percent of the company’s stakes, said at the 2012 shareholders’ meeting on April 19 that the listing does not bring benefits to shareholders; while the shares have low liquidity which does not truly reflect the value of the enterprise.

The proposal by Golden Age on delisting was then approved by the other big shareholders Mascon, holding 35.3 percent, and Vietnam Investments Fund, holding 12.2 percent and other small shareholders.

Just some years ago, Vietnam witnessed the movement of listing shares on the bourse. 700 share items have been listed on the bourses so far. And now the listed companies hurry to delist, which shows the big problems of the market.

Manh Ha

Business & Investment Opportunities 
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