Foreign ownership cap on OTC firms

VNStockNews.com - Foreign investors will be allowed to hold up to 49% of shares in an unlisted, public joint-stock company, effective June 1, under a Government decision issued on Wednesday.

Decision No 55/2009/QD-TTg replaces Decision No 238/2005/QD-TTg, which had designated a cap of 49 per cent on foreign individual and institutional holdings in listed companies and investment funds, but had regulated no such cap for unlisted firms.

The foreign ownership cap will remain at 30 per cent for domestic commercial banks.

The move was among measures suggested by the State Securities Commission earlier this year to develop and stabilise the nation’s stock market and aimed at shoring up investor sentiment in the short term and restructuring the market in the long term.

"It’s a good news for the domestic stock market," said Bien Viet Securities Co deputy general director Vu Duc Nghia. The move would pave the way for the development of the unlisted public company market (UPCoM), Nghia said.

Nghia expected market liquidity to improve significantly over the long term as "the domestic exchange opens to the world market."

SME Securities Co analyst Hoang Thach Lan said the stipulation would balance the rights and interests of foreign investors on both the regular stock exchange and the UPCoM, which was expected to begin operating in June.

Nguyen Thi Hoang Lan of the Ha Noi Securities Trading Centre said development of the UPCoM was a necessary step towards a modern over-the-counter (OTC) market. Of the nearly 4,000 public companies in Viet Nam, around 3,600 firms were trading on the still largely-unregulated OTC market.

The new decision also provides that only foreign companies with securities investment licences were permitted to join in founding a securities company. Foreign investors in securities companies would also be limited to no more than 49% ownership of the firm. (VNS)