Vietnamese companies are rushing to list their shares on the communist country’s two small stock exchanges to take advantage of tax incentives due to be phased out at the end of the year.
In recent weeks, more than 40 groups – most of which have had shares trading in the informal over-the-counter market – have sought listings. Asia Commercial Bank, one of the country’s largest private banks, received clearance to list last week.
John Shrimpton, a director at Dragon Capital, a local investment bank, described a “veritable deluge” of applications – especially compared with companies’ past ambivalence.
“It’s an unprecedented wave of interest in listing,” he said.
The stampede began in September, after Hanoi announced that a two-year, 50 per cent tax reduction for newly listed companies that was used to entice firms onto the exchanges would not apply after December 31.
Jonathan Waugh, a director at PXP Vietnam Asset Management, a local fund management company, said the ending of the tax waiver might be part of Hanoi’s preparations for the partial privatisation and listing of big state enterprises including Bao Viet insurance, Vietcombank, a brewery and a mobile phone operator.
Hanoi cannot afford tax breaks for such large groups, which are vital contributors to government revenue.
“If you get a certain number of those listing and enjoying a tax holiday, the budget could be seriously affected,” Mr Waugh said. “So we think [the end of tax incentives] is a very strong indication that some of the larger state-owned enterprises will finally ‘equitise’ and list in the next 12 months.”
Mr Shrimpton said Hanoi also wanted to cajole reluctant companies to make the leap into the formal market.
“If we see a decent chunk of these companies getting listed, the bottom line is that we are going to have the equity market cap somewhere in the region of $6bn, which is 10 times where we started the year,” he said.
Until now, Vietnam’s formal equity market had expanded sluggishly, in spite of the tax incentives, with firms wary of subjecting themselves to intensive regulatory scrutiny.
Just 52 companies are listed on the six-year-old exchange in Ho Chi Minh City, with another 16 or so listed on the newer Hanoi market. By contrast, shares of at least 150 companies trade in the unregulated, over-the-counter market.
Both listed and OTC companies are generally small and medium-sized former state enterprises that have been semi-privatised, with shares distributed to management, staff and the public.
Interest in Vietnam has soared, partly triggered by a Merrill Lynch report that called the country a “10-year buy” and urged investors to “buy equity exposure now”.
But while the Ho Chi Minh City stock index has risen 66 per cent this year, many have struggled to gain a foothold as foreign holdings in many of the most attractive stocks are at or near the regulatory maximum.
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