Capital Market

Vietnamese government administers the central management of securities and securities market. Ministry of Finance (MOF) holds accountable for securities state management to the Government.

1. Main Agencies in The Securities Industries
 

 The State Securities Commission (“SSC”)
The SSC is the body that licenses securities businesses; approves securities public offering; oversees the operation of stock exchanges, Vietnam securities depository; investigates breaches of, and enforces, the securities laws; and performs other obligations following the securities laws.
 
The SSC’s works are overseen by the MOF.
 
Vietnam Securities Depository
Vietnam Securities Depository (“VSD”) is under the supervision of the SSC. All securities of public companies must be registered with the VSD. VSD is a legal entity established and operating under the model of limited liability company owned by the State. The main functions of VSD are:
  • to register and deposit securities which are publicly issued, listed and traded on the stock exchanges and Upcom;
  • to clear and settle transactions of securities traded on the stock exchanges and Upcom;
  • to issue securities code;
  • to provide asset management services, services for management funds and others required by clients within the scope of functions and duties of VSD; and
  • to act as a transfer agent and handle corporate actions for issuers that have securities publicly issued, registered and listed on the stock exchanges and Upcom.
 
Ho Chi Minh City Stock Exchange and the Hanoi Stock Exchange
The Ho Chi Minh City Stock Exchange (“HOSE”) and the Hanoi Stock Exchange (“HNX”) are Vietnam’s two stock exchanges. Beyond listing and trading securities, the HNX also offers an official mechanism through which new government bonds are issued and is the secondary market for existing government bonds.
 
Various listing criteria applied for admission of trading on both exchanges, including minimum capital requirements, required periods of profitable activities prior to listing, minimum number of non-major shareholders and commitments by management to retain their interests in the company for a minimum specified period.

HOSE is the larger and more liquid market, nonetheless, the conditions of listing on HNX are lower than those applicable to HOSE.
 
The Unlisted Public Companies Market (“Upcom”)
Upcom is the market of securities of unlisted public companies organized by HNX under the rules approved by SSC.
From 1 January 2017 onwards, all public companies in Vietnam shall have to register trading on Upcom.
 

2. Security Market Regulations
Vietnamese securities regulations provides the broad legal framework for securities in Vietnam, specifically legislating:
  • Public offers of securities (which are distinct from listings in Vietnam);
  • Operations and management of public companies (including listed companies);
  • 2 categories of the securities trading markets, primary market and secondary market (presently including the HOSE, HNX and the Upcom);
  • Securities registration, depository, clearance and payment facilities;
  • Securities businesses, including securities companies, funds management companies, securities investment companies and custodian banks;
  • Investment funds; and
  • Disclosure of information by public companies.
 
3. Foreign Involvement 
Historically, foreign investors were allowed to hold up to 49 % of the charter capital in a public company. However, now this blanket cap is eliminated and the percentage of shares owned by foreign investors may be increased up to 100%, subject to the SSC’s approval, unless business activities of the target is conditional for foreign investors or has a foreign ownership limit.
 
In terms of privatized state-owned companies, the limit of foreign ownership will be decided pursuant to the law on equitization and the plan for equitization of such company.
 

4. Procedures for Securities Trading 
Foreign investors wishing to invest in securities must first register the shares subscription with local DPI (if required by law), then obtain a securities trading code from the Vietnam Securities Depository.
 
After obtaining a ST Code, a foreign investor is required to open one, and is allowed to open only one, securities trading account at a securities company to trade shares which are registered to trade on stock exchange.
 
Then, opening an indirect investment capital account at an appropriately authorized bank in Vietnam.
 
Likewise, an investor may trade through a securities company, authorized transaction representative or local fund manager, depending on the investor’s desired level of supervision of their investments.
 

5. Currency in Securities Transactions 
All securities transactions in Vietnam must be conducted in Vietnamese Dong. In order to sell and buy securities of listed enterprises, foreign investors must trade through a Vietnamese Dong indirect investment account opened at a licensed bank in Vietnam.
 

6. Investment Fund 
6.1. In respect of capital mobilization methods, investment funds are sorted into Public Fund and Member Fund: 
  • Public Fund means a securities investment fund which conducts public offering of fund certificates. Public fund is not limited by law to the maximum number of investors, however, due to the large number of investors thereof, it has some investment restrictions to ensure the safety of their capital.
  • Member Fund means a securities investment fund which consists of at most thirty capital-contributing members being legal persons.

6.2. Following the classification of obligations to investors, investment funds include: 
  • Closed-end Fund means a fund has no obligation to repurchase its investment fund certificates to the public at the request of investors. Therefore, investors can only withdraw investment capital by transferring investment fund certificates to other investors on the stock market.
  • Open-end Fund means a fund is obliged to repurchase its investment fund certificate at the request of the investor. The fund of this type has fluctuating capital and number of members. 
 
In accordance with the laws of Vietnam, investors may not forming an investment fund separately and thus, before launching an investment fund, investors must run a Fund Management Company to establish and manage such fund.
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