Hanoi says short selling banned on pilot market
HANOI, - Vietnam will ban short selling on its pilot stock markets to avoid
speculation and has yet to set a cap on foreign
investor stakes in listed shares, an official document
made available on Tuesday showed.
Le Van Chau, chairman of market watchdog the
State Securities Commission (SSC), said working
out the level of foreign ownership was a complex
matter and would need to be decided by Prime
Minister Phan Van Khai.
Khai signed a decree and other documents on
Saturday laying the foundation for pilot stock
markets in southern Ho Chi Minh City and the
capital Hanoi.
Chau, speaking on Tuesday at a news conference
restricted to local reporters, said a Stock Trading
Centre would be set up in Ho Chi Minh City by the
end of the year or the start of 1999.
Hanoi would follow if this one was successful, he
said, according to one participant at the news
conference.
Eventually Vietnam would only operate one
fully-fledged stock market, although Chau gave no
timeframe or said where it would be located.
Most economists have said the pilot markets would
operate like over-the-counter bourses and that a
full exchange would evolve in two or three years.
Underlining the difficulty for communist-ruled
Vietnam's intended flirtation with securities trading,
Chau said only four SSC staff had experience with
a stock market.
``Preparation for this market is not a simple
process because the people involved have very
little experience,'' he said.
Since the early 1990s plans to set up a stock
market in Vietnam have been delayed because of
poor regulation along with a lack of suitable
companies to list.
The official document obtained by Reuters, which
was a summary of the main decree, prohibited
short selling along with insider trading. Short selling
is the sale of shares which are not actually held in
anticipation of a fall in prices.
``In order to prevent speculation...and while the
market is developing, short selling is banned,'' the
document said.
Chau said Khai would determine participation of
foreign partners in joint ventures with local
securities firms along with foreign ownership levels
for listed shares.
An SSC official has told Reuters that foreign
ownership of listed shares would be capped at 30
percent.
``This is a very complex issue. We need capital but
we cannot let huge amounts flow in and out,'' Chau
said.
``Financial and market collapses in neighbouring
countries provide good lessons for us...We should
just not release the chicken and then have to chase
it back into the cage,'' he said, applying a
Vietnamese proverb in reference to hot money
flows.
Chau said he was concerned about the pace of
``equitisation,'' Hanoi's preferred term for selling off
shares in state firms.
Of 29 companies equitised since 1992, only three
or four were making a profit, he said, adding this
would inhibit plans to list a number of such entities.
Therefore, he said the SSC and the Finance
Ministry would create conditions for some state
firms in industries such as oil and gas, aviation,
telecommunications and cement to list.
Following are some details in the official document:
-- Trading will take place in company shares,
government bonds, and other types of securities to
be decided upon later.
-- A company or bank that wishes to list must have
registered capital of 10 billion dong ($770,000)
and have been profitable for the last two years.
-- At least 20 percent of a company's listed shares
must be held by more than 100 investors outside
that issuing firm.
-- Securities companies authorised to trade are
commercial banks and big corporations.
-- SSC inspectors must report big changes in stock
prices.
REUTERS - July 14, 1998.
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