A large number of local enterprises are no longer interested in listing on stock exchanges due to the current dreary equity market, with the VN-Index having sharply fallen by 22% this year.

Delaying listing on stock prices’ downtrend

Viet Tien Garment Joint Stock Corp. two years ago intended to list shares on the HCMC bourse but the dull situation in the stock market has discouraged it from deploying the plan.

Cau Tre Export Goods Processing Joint Stock Co. has put off listing even though it already submitted a listing dossier last year - due to objections from shareholders.

The number of newly-listed firms has dramatically declined on the two bourses compared to previous years.

The HCMC bourse had welcomed 80 new members in 2009 while this year only 26 firms have joined, reported Tran Anh Dao of the Hochiminh Stock Exchange.

For instance, 162 listing dossiers have been approved in practice along with many others ratified earlier this year, but all of them have still not floated shares on the bourse.

The same situation also occurs in the Hanoi bourse, seeing a modest 29 new members joining up, a quarter of last year’s total.

Ban Viet Securities said many customers had asked for its consultation on listing procedures but they finally postponed the plans to cope with the stock market’s slowdown, noted Dinh Quang Hoan of the stock broker.

Harder to mobilize capital

Between 2009 and 2010, several entrepreneurs failing to access banking loans adopted listing as an effective solution to mobilize funds from shareholders. However, this does not work any more as the market has constantly fallen since the beginning of the year.

The majority of firms tend to set share prices at the lowest level of VND10,000 each as the face value when issuing shares to increase capital. Now, it is extremely difficult to attract share buyers at that face value as many stocks have seen prices tumble far below the level.

For the time being, there are roughly 50% of stocks listed on the HCMC bourse traded under the face value, and the number on the Hanoi bourse is 64%.

Vietnam Housing Joint Stock Co., (NVN) has recently decided to stop issuing more than five million shares as securities trading gets stagnant. The price of its shares got cheaper than the face value earlier approved by shareholders, dropping to VND8,600 per share as of now.

Similarly, Danang Steel Co. (DNS) saw its price remarkably decrease to VND6,200 each share.

A recent report from the State Securities Commission showed that mobilizing money via share issuance reached VND6.43 trillion in the year’s first half. This figure accounts for only 40% compared to the same period last year, meaning issuing shares is not considered an effective investment channel for the public any anymore.

Those firms now seeking permission from shareholders to cancel listings attributed their move to the fact that stock prices have considerably fallen while there has been no signs of a recovery.

Outsiders hesitate to step into a market that insiders are trying to get out of, a leader of a securities firm commented on the stock market at home. It is time to strongly stimulate the weakened market and turn it into a reliable investment channel to meet the economy’s development, he added.

SGT