Vietnam passes law for hot securities trade
HANOI - Vietnam will try to curb rampant trade in risky, unlisted shares through a new securities law that will next year create a legal framework for the country's fast-growing stock market, Asia's best performer this year.
The communist state's parliament on Friday approved a law that will take effect in January to streamline stock trading, including runaway over-the-counter (OTC) transactions, where information on companies and investor credit is scarce.
A brief statement on the National Assembly's web site provided few details of the legislation, but it said the law established principles for the operation of stock activities and the stock market and the organisation of stock exchanges.
"Delegates at the National Assembly voted and passed the entire Law on Securities," the statement said. It also included "regulations governing the operation of stock brokerages and stock exchanges before the Securities Law takes effect."
The country's official index, the Ho Chi Minh City Securities Trading Center , has soared 66 percent this year, valuing the six-year-old market at around $2 billion. Its other trading centre is the OTC market in Hanoi .
Interest in unlisted shares has soared among local investors from professionals to housewives, despite risks such as bad credit and lack of information on the companies.
State-run firms often sell stock to employees and outsiders before applying to list on the bourse, creating trade in their shares on the OTC market.
Law debated
Heated debate on the law included the independence of the State Securities Commission watchdog, special licensing of securities businesses and the role of the two trading centres.
Vietnam-based American lawyer Fred Burke, who was consulted on the legislation, said convincing deputies why changes were important "was a struggle at times when many come from provinces where they don't have bank accounts much less cheque books."
Financial experts predict the value of the main stock index could grow five-fold in the next five years.
"Growth will be fuelled by three things, one of which is the move from an informal securities market to a formal securities market," said Dominic Scriven, director of Ho Chi Minh City-based Dragon Capital, which has investments in some of Vietnam's 37 listed companies.
Scriven said growth would also be spurred by privatisation of huge chunks of the economy, including some of the biggest state-owned companies, and the need for funding of companies.
By Nguyen Nhat Lam & Ho Binh Minh - Reuters - June 23, 2006.
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