VietNamNet Bridge - The decision by Vietnamese businesses to increase the cap for foreign ownership is expected to increase share prices.

Fecon JSC, an enterprise specializing in foundations and underground works, on September 20 received SSC (State Securities Commission) approval for the lifting of the foreign ownership ceiling to 75 percent. The price of Fecon shares escalated to the ceiling level immediately after the information was released.

The company planned three share issuance campaigns to increase its charter capital by VND1 trillion.

Meanwhile, Binh Minh Plastics received permission to enlarge the room for foreign investors to 100 percent. SCIC, the largest shareholder, plans to divest all of its shares, 29.5 percent of the plastics company’s capital.

The decision by Vietnamese businesses to increase the cap for foreign ownership is expected to increase share prices.

This has helped Binh Minh’s share price recover after it dropped by 28 percent in July-September because of the reported profit decrease.

In September, Nam Kim Steel (NKG) officially lifted the foreign ownership ceiling to 100 percent after the decision by the shareholders’ meeting in July. The company plans to issue 30 million shares to strategic partners by the end of the year.

NKG price has increased by 33 percent so far this year.

Securities companies have also recently opened to foreign investors. Maritime Securities, for example, has offered 100 percent ownership since September 15 and FSC made the same decision, commencing September 19. 

Prior to that, the proposals to lift the foreign ownership ratio ceiling to 100 percent were made by SSI, FPTS and IVS. HSC also got the nod from SSC.

Only a few enterprises have lowered the foreign ownership ratio ceiling. LienVietPost Bank has set the ceiling at 5 percent, while Techcombank has set a zero percent ceiling, soon after HSBC’s divestment.

Analysts commented that in all cases, the share price escalated after the decisions to offer larger room to foreigners. This is because of increased demand from domestic investors. They think foreigners would rush to buy the shares, so they are buying  shares now to sell later for profit. 

In case of FSC, a securities company, after the news about the foreign ownership ratio ceiling lift was released, 15 senior executives of the company and their relatives registered to divest shares. The news is followed by the enterprises’ plans to issue shares to increase capital.

The government decree No 60 allowing foreign investors to hold up to 100 percent of stake in Vietnamese enterprises took effect two years ago. However, the lifting of the foreign ownership ratio ceiling was only made recently on a large scale.

But only profitable enterprises with good long term prospects can attract foreign partners.

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