The nation's stock exchanges are seeing a new flurry of listings and initial public offerings, but the more diverse investment options don't necessarily spell more quality, according to some securities experts.
On the first day of June alone, the HCM City Stock Exchange welcomed five new listings, including shares of the Petroleum Equipment Assembly and Metal Structure Company and the Saigon Beverage & Transportation Company.
Since the beginning of the year, 60 new codes have been added to the nation's two stock markets, and Sacombank Securities' General Director Nguyen Ho Nam predicted that new listings would continue through the end of the year.
In 2009, companies raised 97.5 per cent of their needed capital through bank loans, with only 2.5 per cent coming from the stock market, noted Le Tham Duong, head of the Department of Business Administration at the Banking Academy.
But the economic recovery and the promise of raising capital through the stock market have now spurred more companies to look to the stock market as an easier – and interest-free – method of financing business operations and expansion, Duong said.
As a consequence, most of the new listings are waved by small- and medium-sized enterprises that have greater difficulty in accessing credit at commercial banks or have felt more heavily the burden of recent higher interest rates.
Some of these small-capitalised companies frequently demonstrate shortcomings in corporate governance, leading to ineffective business results and failures to comply with disclosure rules, said the Deputy Director of SME Securities Co's HCM City branch, Nguyen Thi Ngoc Hang.
"In general, they cause investors high risk," Hang said.
Meanwhile, larger firms have been more wary of looking to the stock market as an option for raising capital due to the poor history of IPO results, commented the Viet Nam Association of Financial Investors (VAFI).
VAFI recommended regulators increase the threshold listing requirements to charter capital of at least VND120 billion for firms that want to list on the HCM City Stock Exchange and VND40 billion for the Ha Noi Stock Exchange.