Vietnam - Opinions differ over foreign ownership

VietNamNet Bridge – The State Securities Commission (SSC) is considering a pilot project allowing foreigners to raise their stakes in listed companies, a policy shift that has drawn varied reactions from market insiders.

If the project is approved, foreign investors will be able to hold more than 49 per cent of shares without voting rights in several types of companies. Experts predict the authority will also allow foreigners to be majority shareholders in sectors not restricted by the State.

Hoang Thach Lan, director of the Mekong Housing Bank Securities Co's brokerage division, expressed skepticism about the policy, saying that while it would theoretically help attract more foreign capital, especially in firms that have reached their legal limit of foreign investors (normally big banks, food and beverage companies), in practice there might not be any significant effect.

"I don't expect that this solution will actually attract more foreign capital," Lan told Tuoi Tre (Youth) newspaper. "In reality, foreign ownership in many listed companies is very small. Foreign holdings in small banks are often less than 1 per cent."

But while raising foreign ownership in listed companies, particularly in commercial banks, is a necessary move in the country's international integration process, this step should be taken cautiously, according to senior economist Dinh The Hien.

"From a business perspective, if foreigners pour more money into a company, they can control that business. Then we would lose many companies, including State-equitised enterprises," Hien said.

However, he added that more foreign investment in listed companies could help raise share prices, although capital flow in the stock market depended heavily on the health of the economy above all else.

Other experts were more supportive of the policy. Huynh Anh Tuan, general director of SJC Securities Co, said making more room for foreign investments would help draw more foreign capital, helping resolve the country's bad debt situation and providing companies with more capital to do business.

"Increasing foreign holdings is only a precondition for growth. To support the stock market, ensuring the quality of goods is more important," Tuan added.

Source: VNS

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