VietNamNet Bridge – Contrary to investors’ expectations, the State Securities Commission’s (SSC) plan to lift the ceiling on foreign ownership ratio in listed companies to over 49 percent has not been approved.

Raising the foreign ownership ratio ceiling has been discussed for the last two years. SSC believes that this would be a very important measure to help the stock market recover.

Its officials many times have mentioned the plan at business forums and were committed to proceed with the plan.

However, most recently, investors have been informed that the plan cannot get approval as soon as expected.

“Offering more room to foreign investors in listed companies proves to be a delicate issue about which relevant agencies would have to think carefully before making decisions, especially in the current conditions,” said Le Hai Tra, Deputy CEO of the HCM City Stock Exchange June 11.

The prolonged argument among relevant agencies still has not come to an end, while a lot of questions remain unanswered.

What will happen if foreign investors buy more shares in a listed company but they still don’t have the right to vote? Will the right be canceled or transferred to others?

Under the current Enterprise Law, enterprises’ important decisions must be made based on the agreement of 65 percent of the shareholders who have the right to vote, provided the shareholders attend the meetings held to discuss the issues.

An enterprise which has foreign investors holding 30 percent of the shares with no right to vote will find it difficult to meet the requirements to have their plans approved.

While SSC insists on lifting the foreign ownership ratio ceiling, some other agencies believe that this should not be seen as a magic wand that can help make the stock market prosper.

A banking expert commented that though the higher foreign ownership ratio could give a push to the market, it will not be a solution for sustainable development.

He said larger room for foreign investors in listed companies would have no significance once there are still many barriers which trip investors’ up.

“Restructuring state-owned enterprises, reforming the credit institution system, stimulating the real estate market and consumption – there are too many things the watchdog agencies need to do before thinking of lifting the cap on foreign ownership ratio,” he said.

He also said he still cannot imagine how the market will be if no limitation in ownership ratio is set for foreigners.  

In case the plan does not get the thumbs-up from the government, Tra of SSC said the other most convincing solution is NVDR - No voting depository receipt.

NVDR is the depository certificate allowing foreign investors to enjoy all the financial benefits of listed companies’ shares, except voting rights.

NVDR has been successfully applied in Thailand, a market similar to Vietnam, while some financial tools nearly the same as NVDR have been used in Malaysia, India and Singapore. Therefore, foreign investors in Asia are familiar with the tool, which would be a favorable factor for Vietnam to use the method.

TBKTSG/VNN