The government’s Decree No. 58 has paved the way for foreign investors to set up 100 percent foreign owned securities companies in Vietnam.

However, the provision about the foreign investors’ share purchases and capital contribution to securities companies has been left “open.”

The Decision No. 55 dated in 2009 on the maximum allowed ownership ratios in the stock market stipulates that foreigners can hold up to 49 percent of the chartered capital of domestic securities companies. Therefore, the legal document needs an amendment to pave the way for the foreign capital flow to domestic securities companies as stipulated in the Decree No. 58.

The State Securities Commission (SSC), which is drafting the legal document, has shown the provisions that, as analysts comment, make many investors to stay outside the Vietnamese market, or force them to take a roundabout to obtain their goals.

The two barriers

The Decree No. 58 stipulates that the foreign institutions holding 100 percent of capital of domestic securities companies must be the institutions operating in the fields of banking, securities, or insurance. They must have the minimum operation durations of two years before they make a capital contribution to the domestic securities companies.

A report by SSC showed that there are 12 securities companies where foreign investors hold 49 percent of stakes (46 percent in Phu Hung Securities Company). Of these, Maybank Kim Eng, Kenaga, VSEC, Morgan Stanley Huong Viet have banks as shareholders. Meanwhile, Mirae Asset, Saigon Berjaya, Woorie CBV, Japan Securities and Kis Vietnam have securities companies as investors.

The above said companies would be easily able to shift into 100 percent foreign owned securities companies.

Meanwhile, CX Techonoly, the shareholder of Phu Hung Securities, is a multi-field group. Golden Bridge, which is a shareholder of Vina Securities--a finance investment group. Another shareholder –VinaCapital Group – is an investment fund. And the two shareholders of GBS and PHS operate in the finance sector, but they are not in banking, securities or insurance fields.

GBS now needs capital urgently, but it’s really very difficult to raise funds in the current conditions of the gloomy stock market. In principle, GBS can expect the capital to be pumped by the holding company.

However, there are two barriers for the holding company – Golden Bridge – to pour more capital into GBS. First, Golden Bridge is an investment group, not a legal entity in the banking, securities or insurance factors. As such, if wanting to hold 100 percent of stakes of GBS, the group would have to do that via an investment fund or securities company.

Secondly, the draft legal document which is expected to replace the current Decision No. 55 stipulates that 100 percent foreign owned securities companies would have to operate under the mode of single member company limited.

An SSC’s official has explained that foreign investors would have to hold either less than 49 percent of stakes, or hold 100 percent, while 65-75 percent ownership ratios would not be accepted.

In case of GBS, if the holding company wants to hold 100 percent of capital, GBS would have to turn into a limited company, which means that it would have to delist its shares from the bourse.

Commenting about the ability of foreign securities companies, experts say not all the current foreign invested companies have been profitable, while understanding domestic investors well remains a great advantage of domestic securities companies.

Source: VietnamNet.