Vietnam Securities 2011

7/31/2019 Vietnam Securities 2011

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Guide to

Vietnam Securities

2011


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About Viet Capital Securities

Viet Capital Securities (VCSC) is a leading securities rm fully licensed by the State Securities Commission

of Vietnam to provide investment banking, research and brokerage services in Vietnam to governments,

corporations, institutions and individuals worldwide.

VCSC is the largest investment bank in terms of revenues from capital markets and corporate nanceactivities and has been involved in numerous landmark deals in Vietnam. Our brokerage market share is in

the Top 10 and clients include some of the largest and well-known asset management rms in Vietnam and

the world.

Recent awards by Finance Asia, Alpha Southeast Asia and The Asset emphasize our leadership in Vietnams

Capital Markets.

Services include:

Award winning:

Contacts:

To sign up for our research, please contact us at [email protected]

Research

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headed by 10+years CFA

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Technical Analysis (daily)

Commentary (daily)

ResearchMarc Djandji

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Research Access

Analysts calls Corporate access

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Dedicated to serving

institutions worldwide

Brokerage: Listed & OTC Block sourcing / building

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Sales Products

Morning Notes Guide to VN Securities

OTC quotes

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Vietnam, 2011

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Vietnam, 2011

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Investment banking

Advisor to most of the top

companies

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HSX, HNX

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2010

TRIPL EA

Alpha

SoutheastAsia


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2 page | www.vcsc.com.vn

Guide to Vietnam SecuritiesViet Capital Securities Guide to Vietnam Securities covers everything investors need to understand to trade

in Vietnam. Whether listed or unlisted securities or IPOs, its all exposed in the nest details. No stones left

unturned. No half truths.

Content

1. Listed Securities 4

1.1. Overview 5

1.2. Placing an order 6

1.3. Trading restrictions 8

1.4. Disclosure requirements 9

1.5. Order matching and price determination 11

2. Unlisted OTC Securities 12

2.1. Introduction 13

2.2. Process of trading OTC securities 13

2.3. Conclusion 15

2.4. WTO and FOL for OTC securities 15

2.5. List of documents needed to trade OTC securities 16

3. IPOs 18

3.1. IPOs & auction basics 19

3.2. How to participate in an auction in Vietnam 20

3.3. Auction example 21

3.4. VCSC as an auction agent 21

3.5. Auction registration (checklist) 21

3.6. Background information on share offerings in Vietnam 22

3.7. Auction process ow (summary) 24

4. Annexes 264.1. Setting up to invest in Vietnam 27

4.2. List of banks offering custody services 28

4.3. Rights and obligations of investors 29

4.4. Capital ows 29

4.5. Taxes 30

4.6. Board membership 30

4.7. Legalization process 31


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Guide to Vietnam Securies

2011

[email protected] | VCSC | page 3

Interpretation of terms

Outstanding shares: means the total amount of shares issued by the company. This number can be

different from the amount of listed shares, which is the amount effectively listed by the company on oneof Vietnams stock exchange (a company cannot list shares on both exchanges at the same time). Some

companies do not list all their shares, notably VCB and CTG.

Voting shares: Voting shares are currently the same as outstanding shares as Vietnam only has one

class of shares which are all entitled to the same rights and obligations. We talk about voting shares in

certain sections of this document as the law refers to that specic term on these specic occasions. Thedistinction between outstanding shares and voting shares will become important as Vietnam allows different

classes of shares carrying different rights and obligations. We make the distinction at this time out of a

desire for precision.

Strategic Investor: Decision 36/2003/QD-TTG from the Ministry of Finance stipulates that if foreigninvestors desire to become strategic investors of Vietnamese enterprises, they must have the nancial

capacity and ability to support Vietnamese enterprises in developing, improving ability of administration and

management and apply of modern technology, and have close relations with enterprises on a long term

basis in terms of interests, and satisfy specic criteria set out by the enterprises.

Disclaimer

No representation, warranty or undertaking, expressed or implied, is given as to the accuracy or completeness of the

information contained in this document by any of Viet Capital Securities, its members, employees or afliates and no

liability is accepted by such persons for the accuracy or completeness of any such information. The information is intended

for general guidance only, and it is the responsibility of any person or persons in possession of this document to inform

themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. One must understand that

the information may be change at any time without warning by Vietnam authorities. In addition, practice may be different

from the letter of the law. We did make the utmost effort to ensure that all information is accurate at the time we published.

The distribution of this document may be restricted in certain jurisdictions in which case you may not use it.


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Listed

Securities


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1.1. Overview

Stock exchanges

(abbr.)

Ho Chi Minh Stock Exchange

(HSX)

Hanoi Stock Exchange

(HNX)

Reference

Reuters: .VNI

Bloomberg: VNINDEX

http://www.hsx.vn

Reuters: .HNXI

Bloomberg: VHINDEX

http://www.hnx.vn

Currency of trade Vietnam Dong (VND)

Trading days Monday Friday (GMT+07:00)

Holidays January 1st New Year

Jan-Feb (last day of the last lunar month to the third day of the rst lunarmonth inclusively) Vietnamese (Chinese) New Year

April (10th day of the 3rd lunar month) King Hung Commemorations

April 30 Liberation Day

May 1 Labour Day

September 2 National Holiday

Boards 1) One main board only (HSX)1) Main board (HNX)

2) Nasdaq type board (UpCom)

Trading hours HSX: Equities (no bonds on HSX)

Session 1: 08:30-08:45 (P.OM & PT)Session 2: 08:45-10:30 (C.OM & PT)

Session 3: 10:30-10:45 (P.OM & PT)

Session 4: 10:45-11:00 (PT only)

Matching in session 1 and 3 is done at

the end of each session (periodic order

matching, or P.OM) while Session 2

matching is continuous throughout the

session (or C.OM). Trading hours are

expected to extend to the afternoon in 20

Feb 2012.

A Put-Through (PT) is the act of

directly matching an order with another

market participant, aka block dealing.

PT transactions can occur at anytime

during trading hours. On the HSX, any

order of 20,000 shares or more must be

matched via PT, either by nding your own

counterparty, or asking your broker to help.

Orders of less than 20,000 shares cannot

be match in PT. All PT transactions are

matched through the exchanges system.Note its possible to break large orders into

multiple smaller one to avoid PT.

HNX: Equities & Bonds

Session 1: 08:30 11:00(Continuous OM and PT)

UpCom: Equities & Bonds

Session 1: 08:30 11:30

Session 2: 13:30 15:00

(Continuous OM and PT)

HNX only has one session where

matching is conducted by order matching

(OM) or put-through (PT) both for

equities and bonds. A Put-Trough (PT) is

optional if trading at least 5,000 shares

or 1,000 bonds. Order matching (OM) is

mandatory for smaller trades. Note its

always possible to break large orders into

multiple smaller one to avoid PT.

UpCom has two sessions where trades

are matched through OM or PT. On the

rst day of a newly listed stock, only OM

orders are accepted.


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1.2. Placing an order

Order types & validity HSX

LO: Limit order, valid the entire day

ATO: Market order valid in 1st session

only, matching priority over LO

ATC: Market order valid in 3rdsession

only, matching priority over LO

MP: Market order (approved, but not

yet implemented)

HNX / UpCom

LO: Limit order, valid the entire day

Daily price change

limit (aka collar)

(price ceiling and oor

on the day)

HSX

Equities: 5% of previous days close,

20% if 1st day of listing

Bonds: No limit

HNX

Equities: 7% of previous days volume

weighted average price.

30% if 1st day of listing.

UpCom

Equities: 10% of previous days volume

weighted average price.

40% if 1st of listing

Bonds: No limit

Price Units / Ticks

/ aka Quote unit

(smallest multiple one

can price shares at)

Price unit

if current

price is (VND):

Equities Bonds

HSX HNX UpCom All Exch

49,900 100vnd 100vnd 100vnd None

50,000 to


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Amending and

cancelling orders

HSX

Session 1: Cannot cancel any order.

Unmatched portion of ATO orders are

cancelled at the end of the session.

Session 2: Unmatched portion of any

order can be cancelled at any time.

Session 3: Can only cancel limit orders

that were placed in previous sessions.

New orders cannot be cancelled.

Session 4: N/A

Its impossible to change the price or

quantity of an order; you must cancel

the order and then enter a new one.

HNX / UpCom

Session 1: Unmatched portion of any

order can be cancelled at any time

It is possible to change the price of any

order at any time, but to change the

quantity you must rst cancel your current

order and enter a new one.

Matching priority All exchanges (PTQ principle)

#1 Price priority : priority to the highest price bid or the lowest ask

#2 Time priority : for orders at same price, priority to orders that came in rst

#3 Quantity priority : for orders at same price and time, priority is given to

orders with the highest quantity of shares

Matching principle HSX

Buy orders at higher or equal price

than sell orders are matched against

each other following the PTQ principle.

Partial lls are possible.

HNX / UpCom

Buy orders at higher or equal price to sell

orders are matched against each other

following the PTQ principle. Partial lls

are possible

See section on order matching and price determination further in this document

for details about how ATO and ATC orders are matched.

Settlement

(cash/stocks received

on settlement day can

only be used the day

after)

HSX

Equities: T+3 days; T+1 if transacting

over 100,000 shares by put-through

HNX

Equities: T+3 days; T+1 if transacting

over 100,000 shares by put-through

Bonds: T+3; choice of T+1,2 or 3 if

transacting over 100,000 bonds

UpCom

Equities & Bonds: T+3

Face value Equities: 10,000vnd

Bonds: 100,000vnd

Odd-lots Odd lots (shares owned in a number below 10 on the HSX and below 100 on the

HNX) may be kept, sold in a PT transaction, or sold to your broker.


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1.3. Trading restrictions

Foreign ownership

limit (FOL)

Equities: 49% of outstanding shares, 30% for banks*, and less for companies

that pledged to list a some shares offshore; note that certain companies do not

list all their shares and therefore the FOL for the shares listed would be higher

(for example, a company that lists say less than 49% of its outstanding shares,

foreigners could buy up to 100% of the listed shares). FOL is available in real-time

on Bloomberg (all stocks) and on VCSCs price board (www.vcsc.com.vn), just

hover your mouse over any ticker (HSX only).

Bonds: No FOL

* Banks FOL is limited to maximum of 5% for any single investor, 10% for any

investor that is a bank, and 15% for any strategic investor. A 20% stake requires

the approval of the Prime Minster. FOL for banks include afliated persons (see

page 10 for details).

Restrictions on

newly listed shares

Applies to equities only: Shareholders that are also members of the board of

directors or board of controllers, a director, general director, deputy director or chief

accountant of a newly listed company must undertake to hold 100% of the shares

they own for a period of six (6) months from the date of listing and 50% of this

amount for the following six (6) months, excluding any shares held by individuals

acting as representative of the State.

Private equity rms who take board seats need to take note of this when planning

their exit strategy.

Other restrictions Funding requirement / short selling: Investors must have sufcient funds in their

local currency (VND) bank account if buying, or sufcient securities if selling (e.g.

short selling is not permitted). If investors have a pending FX transaction from a

foreign currency to VND, your custodian may take this into account when verifying

for funding requirement. Your custodian is the one who decides if these pending

transactions can be counted towards your funding requirement, not your broker.

Same day buy / sell: It is possible to buy and sell the same ticker on the same day

as long as you follow certain restrictions:

You may only place a buy order if you do not have a current sell order on the

same ticker, and vice versa. If you do, you will have to cancel your current

order before placing your second order on the same ticker.

One ticker, one broker. If you buy (or sell) shares with a broker, for the rest of

the day, you may only buy (or sell) the same ticker with the same broker.

Margin lending: Permitted for local investors only (albeit not for now as full

implementation of this new regulation is not possible yet).

Securities borrowing or lending: Not permitted.


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1.4. Disclosure requirements

Disclosure based on

insider trading

(including substantial

shareholders)

Applies to equities only: If a shareholder wishes to buy or sell shares and he

or its afliated persons* is considered an insider, the shareholder must declare

its intention, and how many shares are to be bought and/or sold in a given period

(maximum two months), to the SSC, the stock exchange (HSX or HNX) and the

company at least 3 days before trading any amount of shares. Upon receipt of

the notice, the stock exchange will advertise the information on its website and

the shareholder will be allowed to trade only 24h after such information has been

advertised. Should the shareholder complete its intended trades, or should the

given period expire, whichever come rst, the shareholder must declare the results

of its trades within 3 days of the date of completion or expiry, whichever come rst.

If the results differ from declared intentions, he must explain why.

Investors are solely responsible for any and all disclosures. Should clients require

assistance, VCSC will be happy to help.

* see page 10 for details

Disclosure based

on substantial

ownership

(equal or more than

5% of total voting

shares)

Applies to equities only: Anytime a shareholder acquires and amount equal to

or greater than 5% of the total number of voting shares of a company, including

the amounts held by its afliated persons*, the shareholder must declare the fact

within 5 days of the date of the transaction that brought the shareholding (including

its afliated persons) to an amount equal to or greater than 5%. The same applies

if reducing a stake below 5%.

Finally, anytime a substantial shareholder (including its afliated persons) increasesor reduces their stake by an amount equal to or more than 1% of the total amount

of voting shares of a company since their last declaration must also declare their

new ownership level each time they pass that threshold. The law is silent as to who,

between the afliated persons, must make the disclosure.

While VCSC will help its clients meet their disclosure obligations, according to

Vietnam laws, investors are solely responsible for any and all disclosures.

* see page 10 for details


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Insider means:

(a) Members of the board of management and board of controllers, the director or general director and the

deputy director or deputy general director of a public company; members of the committee of representa-

tives of a public fund;

(b) Major shareholders of a public company or of a public fund;

(c) Auditors of the nancial statements of a public company or of a public fund;

(d) Other persons with access to inside information of a public company or public fund;

(dd) Securities companies, securities investment fund management companies and securities practitioners

of such companies;

(e) Organizations and individuals with a business co-operation relationship with, or who provide services

to a public company or a public fund, and people working in such organizations;

(g) People who directly or indirectly obtain inside information from the subjects stipulated in sub clauses

(a) to (dd) inclusive of this clause.

Afliated person means:

(a) Parents, adopted parents, spouses, children, adopted children and siblings of any such individual;

(b) Organizations in which there are individuals who are staff, the director or general director, or the ownerof more than fteen (15) per cent of the voting shares in circulation;

(c) Members of the board of management or board of controllers, the director or general director and the

deputy director or deputy general director and other managerial personnel of such organization;

(d) People who in a relationship with another person directly or indirectly control or are jointly controlled

by such other person, or who jointly with another person are subject to the same control;

(dd) A parent company and its subsidiaries;

(e) A contractual relationship in which one person is the representative of the other.

Afliated person as it applies to banks FOL* (slightly different from afliated person under other

circumstances (as above):

(a) The parent company of that entity or any other member company that is within the same parent

company with that entity;

(b) Any person or an institution that manages the parent company or has the authority to appoint executive

ofcers in the parent company of that entity;

(c) Any member company or subsidiary of that entity;

(d) Any executive ofcer, member of the Board of Controllers, or person/ entity with authority to appoint

the executive ofcer of that entity;

(dd) Any shareholder or group of shareholders holding 10% or more of total common shares of that

entity;

(e) Spouse, parent, adoptive parent, children, adopted children, and brothers and sisters (and spouses

of these persons) of any executive ofcer, member of the Board of Controllers, or shareholder holding

10% or more of the total common shares of that entity;

(f) Spouse, parent, adoptive parent, children, adopted children, and brothers and sisters (and spouses ofthese persons) of that individual;

(g) An individual authorized to represent such persons referred to in paragraphs (1), (2), (3), (4), (5),

(6), and (7) above, with respect to their authorisers and related persons of tHSX authorisers and

authorised persons.

* The dd in the above lists come from the translation of legal texts into English. It comes from the fact

that the Vietnamese alphabet contains both a d and a d with a bar, with the later represented as dd

in English.


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Periodic Order Matching (HSX only): Buy and sell orders are queued for matching at a specic time at the

single lowest price that generates the highest trading volume. For example, if person (a) buys 10 shares at

100vnd, person (b) sells 3 shares at 90, person (c) sells 3 shares at 92, person (d) sells 3 shares at 95 and

person (e) sells 4 shares at 97, the matching price will be 97, where (a) will buy 10 shares, (b), (c) and (d) will

sell all their shares, and (e) will sell 1 share only. All parties transact at 97vnd/shares. This matching method

is used to determine the opening and closing price of stocks. Orders in Periodic sessions are matched at the

end of the session only, during which ATO/ATC orders have priority over Limit Orders.

Continuous Order Matching (All exchanges): The trading systems of each exchange continuously

matches the rst buy and sell order in the queue, and at the same time, conrms each executed transaction

via the broker/traders terminal. As priority is given to the rst order placed, this can make a major difference

in your strategy. For example, if a person places an order to buy stock ABC at 100vnd and another person

places an order to sell the same stock at 90vnd, the matching price will depend on who rst placed the order.

If the buyer placed it rst, the matching price will be 90vnd. If the seller placed it rst, the matching price will

be 100vnd.

Put-Through: Price and quantity are negotiated directly between the buyer and the seller or their representa-

tive, but the deal is only concluded when its matched in the exchange trading system during any session

that allows Put-Through (PT). The trading system also allows brokers to advertise IOIs to nd potential

buyers/sellers. The executed price must follow the price range for that particular stock on the day the trade

is executed.

FOL intraday: When the FOL of a particular stock is reached during trading hours, all current buy orders

from foreign entities will automatically be cancelled by the system. Additionally, the systems will reject any

all buy orders from foreign entities for the remainder of the day. Sell orders are always accepted however.

Shares that foreign investors sell to non-foreign parties are added to the number of shares available to

foreign investors after the settlement period (T+3). This rule also applies to Put-Through transactions. Note

it is possible for a foreign buyer to transact a PT with a foreign seller even if the FOL for that particular stock

has reached the limit.

Opening Price: On the HSX, the opening price (aka reference price) is equal to the previous days closing

price as determined in session 3 (not including PT transactions). In cases where the closing price couldnt

be determined in session 3, the closing price is equal to the last price at which shares were transacted on

that day. If no shares were traded on that day, the second previous day is taken, and so on. On the HNX

and Upcom, the opening price is the volume weighted average price (VWAP) of all order-matched orders

(excluding PT) of the previous day.

Reference price of newly listed stocks: The opening price of newly listed stocks is determined betweenthe company, the advisors and the stock exchange. If the matching price of newly listed shares/investment

fund certicates cannot be determined in the rst three trading days, the issuing organization shall adjust

the expected trading price.

Ex-Dividend / Ex-Right Prices: On the ex-dividend date and/or ex-right date, the reference price shall be

determined by adjusting the last trading days closing price or the average price of the last few trading days,

at the companys discretion, by the value of dividend or right accordingly.

1.5. Order matching and price determination


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Unlisted

OTC Securities


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2.1. Introduction

2.2. Process of trading OTC securities

This part covers the process of trading unlisted securities, aka OTCs. The OTC market is unregulated (there

is no disclosures required either), with prices and volumes not reported to any centralized exchange or system.

The only way to obtain price information is to ask people who are active traders of OTC companies. Some

websites also colligated information and act as a marketplace for buyers and sellers. Volume information is

usually hard to obtain. The UpCom was established to provide more transparent price and volume information

for unlisted stocks. However, only a few companies have listed on that exchange and volumes are extremely

low for now.

As of January 2010, it is estimated that roughly 2,000 companies are eligible for trading on the OTC market, of

which approximately 50 are liquid and interesting enough to be considered by foreign investors. To be traded

on the OTC market, a company must be a public company, which in Vietnams legal system means a Joint

Stock Company (JSC, a type of legal structure) with over 100 shareholders. Buying OTC securities is akin to

investing in a private company and is considered by many as private equity investing.

The role of your broker

Technically speaking, there are no obligations forcing investors to use brokers when negotiating OTC

transactions. In practice, however, many will nd that using brokers can help facilitate the OTC trading

process, especially if youre located outside of Vietnam. Moreover, several foreign investors prefer that their

brokers transact the shares on their behalf in a move to hide their identity and limit market impact. VCSC

can help at any and all steps of the OTC trading process.

The OTC trading Process

** Please note that the OTC trading process isnt standardised in any way. While some brokers and traders

will cut corners, we consider the following process as one of the most diligent way to trade unlisted OTC

securities in Vietnam.

1. Contactthe company or its registrar (depending on the size of the company) to:

a. Make sure there is room for foreigners to buy, however, if buying from another foreign party, there

is no need to verify this;

b. Know if any special rules apply to trading this companys shares (may apply in cases of large

trades, or certain types of shares such as founding shares);

c. If buying more than 5% of the companies outstanding shares, approval from authorities may be

required, depending on the scope of business of the company, for both for the seller and the

buyer. It is advisable to make sure these approvals are obtained before moving forward with the

transaction

2. Finda buyer or a seller

a. Understand your counterparty (founding shareholder, fund, individual, etc);

b. Verify that the shares being sold are free to trade (certain restrictions may apply to founding shares,

shares of a member of the board, etc);

c. If buying in large quantities, brokers are often appointed to aggregate the targeted amount of

shares to limit market impact.

3. Negotiate price, quantity, timeline, deposit, settlement procedures, and anything else you deem

important with the buyer/seller. All this should be included in a Sale/Purchase Agreement (SPA).

4. Sign and seal two agreements with your counterparty:

a. Sale / Purchase Agreement (SPA);

i. Vietnamese, English or bilingual version of the SPA are accepted and enforceable in Vietnam.

In case the SPA is in English, it will have to be translated for use in court. In case of differences


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between versions, the English version will prevail if provisioned for in the contract;

ii. We can provide with an English and/or Vietnamese SPAs that have been used for trading multiple

times, but we cannot guarantee it will protect you in all cases. You should consult your lawyer.

b. Share Transfer Agreement (STA) using the format required by the company or registrar.

5. Deposit (usually 10-30%, up to negotiations) by bank transfer from yourcapital contribution account

if youre a foreign entity in Vietnam (any account otherwise) to the account of the seller. To make the

transfer, the bank will require:

For individuals with accounts at BIDV:

Sales/Purchase Agreement (SPA) signed and stamped by both parties;

Share Transfer Agreement (STA) using the format required by the registrar;

Payment Order with passport/ ID card to prove the identity of the transferor. Note that Payment

Orders need to be signed by the account holder, unless you sign one overseas and send it by post

directly to the bank, or unless you appointed a permanent authorized person with BIDVs.

For institutions: Sales/Purchase Agreement (SPA) signed and stamped by both parties;


Instruction from the account holder to the custodian bank to effect the transfer of shares;

Note: Some institutions have a policy not to pay for anything unless the shares are already in their possession

(e.g. no deposit). In such case, your broker may accept to make the deposit on your behalf, provided that a

broker contract protecting the broker from counterparty risk is signed.

6. Registerthe trade with the registrar to effect the transaction. Responsibility for this can be delegated to

the buyer, the seller, or you can appoint a 3rdparty to act on your behalf in which case a notarized POA

is required. If using a 3rdparty, you should make sure the POA is exible enough to allow the third party

to represent you in all parts of the OTC trading processes.

The following documents are usually required by the company or registrar to effect the transaction (may

vary on a case by case basis):

a. Sales/Purchase Agreement (SPA) signed and stamped by both parties;

b. Share Transfer Agreement (STA) using the registrars format;

c. Share Certicate of the Seller;

i. For individuals: If selling and your account is with BIDV, withdrawal of OTC shares in custody

must be done by the client in person unless a Mandatory Person has been appointed prior.

If using another custodian, please contact them for their specic requirements.

ii. For institutions: If selling, you can give instruction to your custodian bank to allow a 3rd partyto withdraw the shares in their custody. No other document is required.

d. The presence of the buyer is required to register the trade. If this cannot be arranged, you may

assign a 3rdparty to effect the transaction as long as a notarized POA to this effect is provided.

The following documents mayalso be required, depending on the registrar. It is possible that these

documents require legalization . You should prepare multiple sets of such documents in advance just

in case.

i. Legalized2 Business Registration Certicate or Certicate of Incorporation of both the buyer

and seller (if applicable);

ii. Legalized3 List of authorized representatives of both parties (if any);

iii. Legalized

4

Extracts of the charter of institutions involved in the transaction.

The registrar will normally issue a receiptonce this step is completed. In some cases, the registrar may

issue the shares without issuing a receipt prior.


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1See Annex for details on the legalisation process2 ibid

3 ibid

4 ibid

7. Pay the balance to the seller (100% less the deposit already paid).

a. Go to your bank, make the transfer. Same requirements as in step 5;

b. Full payment can be done earlier or later, depending on negotiations.

8. Returnto the company or registrar and exchange the receipt received in step 6 for a share certicate.

Sometimes, physical shares will not be issued, but your name will be inscribed in the share book

a. This step aims to unregister the seller and register the buyer as the new shareholder. Normally, it

takes the registrar three (3) days to issue the share certicate to the new shareholder along with

their name on the shares.

b. The presence of the buyer is required at this step. If this cannot be arranged, you may give a POA

to a 3rdparty to effect the transaction. If using a 3rdparty, you should make sure the POA is exible

enough to allow the third party to represent you in all parts of the OTC trading processes.

9. Safeguard all documents, including SPAs and STAs, in a safe place. They will be required should you

want to sell your shares and/or remit your money abroad.

a. Individuals: depository of shares at BIDV must be done by the client in person unless a MandatoryPerson has been appointed prior. If using another custodian, please contact them for their specic

requirements.

b. Institutions: Any 3rdparty can deposit shares in your account.

2.3. Conclusion

2.4. WTO and FOL for OTC securities

Theres room for counterparty risks for which we cannot make any guarantees, even if we are involved in the

process or acting as a representative. These risks mainly depend on the quality of the buyer/seller. Due to the

existence of such risks, some clients prefer to buy the shares from their broker after the later bought it from a

third party.

Trading unlisted OTC securities can be lucrative, especially if the company plans to list soon, but should only

be attempted by serious foreign investors. Travel to Vietnam is usually necessary at one point or another to

settle the trade, unless a notarized POA is given to an individual acting on your behalf in Vietnam.

The FOL for unlisted securities varies according to Vietnams WTO service commitments (see WTOs website

for details). Generally speaking, industrials arent restricted (up to 100% is possible) except for particular

goods such as oil & gas, automobile, beer and fertilizers. Retail is restricted, but most other services arent.

Sectors are scheduled to open gradually to foreign participation at different dates. Note that local practices

may narrow down the framework set by Vietnams WTO service commitments from time to time. There are

no FOL for unlisted bonds.

To buy even a single share of an OTC bank, a foreign investor must secure the approval of the State Bank of

Vietnam (SBV). In practice, such approval has only been granted to foreign banks who pledge to be strategic

investors. This restriction does not apply to Vietnamese banks going into an IPO or tHSX already listed (see

respective chapters).


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2.5. List of documents needed to trade OTC securities

Standard documents needed for OTC transactions:

Sales/Purchase Agreement (SPA) signed and stamped by both parties;


Share Certicate of the Seller;

Broker Contract if you want your broker to make the deposit on your behalf (optional)

POA for a 3rdparty to act on your behalf (optional)

In addition, individualswillneedto provide the following:

Payment Order with passport/ ID card to prove the identity of the transferor (can be a 3rdparty if properly

authorised);

In addition, institutionsmayneed to provide the following:

Legalized5 Business Registration Certicate or Certicate of Incorporation (in case of institutions) of

both buyer and seller (if applicable);

Legalized6

List of authorized representatives of both buyer and seller (if any); Legalized7 Extracts of the charter of institutions involved in the transaction.


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5See Annex for details on the legalisation process

6 Ibid

7 Ibid


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IPOs


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3.2. How to participate in an auction in Vietnam

1) Deposit: Compulsory deposit to participate in an auction is 10% of the total VND amount you intend

to subscribe to, based on the reference price and your desired number of shares. The amount must be

sourced from your capital contribution account in Vietnam.

2) Registration: you need to register with any auction agent by providing the necessary documents

(detailed documentation described in the next section).

a) The duly completed registration package must be received before the time of registration

announced. The actual deadline is provided for each auction, but usually is 10 days from the

moment the auction is announced.

b) Make the 10% deposit.

c) Fax all documents, including bank transfer receipt, to VCSC for advance registration. Original

copies must be received before the time of registration date.

d) The registration must indicate the number of shares you intend to buy, but not the price.

3) Processing: Once your package is received, details are entered in the stock exchange system which

issues your Bidding Papers sent to foreign investors by express courier. Cost for the courier is billed

separately.

4) Bidding: upon receipt of the Bidding Papers, you must complete and return them to the auction agent

by express mail before the time of price submission.

a) You will lose your deposit if:

i) your bidding price is lower than the reference price;

ii) your bid is received after the deadline;

iii) you buy less than the same amount of shares you registered for.

b) For certain auctions, investors may give various bidding prices for various lots of shares provided

that the total amount of shares is equal to the number you registered for. Auctions that allow suchpricing explicitly say so.

5) Physical presence: investors may, if they so wish, participate in the actual auction being held at the

stock exchange or security rm helping with the share issuance. There are no advantages in being

present other than seeing other bidders prices. You may elect for someone else to be present in lieu.

6) Cancellation of participation: Where an Investor wishes to cancel its participation in an auction, the

Investor must ll in the proper cancellation form and must be received by your auction agent before the

time of registration deadline. You will still lose your deposit otherwise.

7) Winning and losing: Two (2) days after the auction date, investors will be informed as to whether their

bid is successful or not. Shares are automatically allocated to the highest bidder and so on until all

shares have been allocated.

How a strategic investor is cHSXn may vary depending in the situation:

In cases where the entity is a SOE, strategic investors will be sought after and assigned by the State.

Where the SOE is a large corporation such as a bank or telecom, the SOE may seek and choose its

strategic investor by itself.

In cases where the company is a private entity, strategic investors may actively seek for a strategic

relationship. Relationship is then established depending on negotiation.

In cases where an IPO or SPO has been planned with an advisory rm, the advisor may suggest and act as an agent

in approaching potential strategic investors.

Strategic investors are free to approach a company directly unless the later is a state owned entity in which

case the investor should approach the Government of Vietnam or its representative body (such as the SCIC,

or State Capital Investment Corporation).


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3.3. Where to send your deposit and money

3.4. Auction example

3.5. VCSC as an auction agent

Account beneciary: Viet Capital Securities Joint Stock Company

Account number: 119.10.000.10726.0

Bank: BIDV Nam Ky Khoi Nghia Branch

Address: 12-14 Nam Ky Khoi Nghia, District 1, Ho Chi Minh City

Swift code: BIDV VNVX

Note: For the benece of [company] IPO

Company ABC is issuing 3,600,000 shares in an IPO at a oor /reserve /reference price 40,000 VND. Let


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3.7. Background information on share offerings in Vietnam

ii) For individuals (checklist)

Documents Special requirements

Registration form(provided by the auction agent for each auction)

Transfers need to be done by the account holder in person.

Stamped by your bank at

the time you transfer your

deposit to the auction agent.

Passport copies or ID cards of the account holder and the

authorised person (if any)

Bank slip proving that the deposit amount was transferred from your

Capital Contribution Account to the auction agent account

Letter of Authorization(provided by the auction agent) only needed if

the person signing the registration and bidding isnt the account holder)

*See Annexes for details on legalization

Legalized*

Requirements before conducting an IPO

Being a joint stock company or equitized SOE;

Having an actual minimum prescribed charter capital of VND10 billion;

Having been making prot in the year before the date you apply for IPO, as well as having a healthy

nancial status and development prospects;

Having a reasonable plan regarding the usage of the capital raised from the issuance as approved by

the Board of Management.

The applicants nancial statements should be audited by an auditing company approved/authorized by

the State Securities Commission. Lists of authorized auditing companies and auditors are available on

the website of the State Securities Commission www.ssc.gov.vn

Passport copies or ID cards of the applicant and legal

representative of the institution (if both aren`t the same)

Certicate or Letterfrom your bank that you have a Capital

Contribution Account

Original or notarized copy

(foreign institutions only)

Bank slip proving that the deposit amount was transferred to your

auction agents account

Letter of Authorization (provided by the auction agent only needed

if the signatory isnt the legal representative)

Legalized* (VN institutionsneed only stamp)

*See Annexes for details on legalization


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3.7. Auction process ow (summary)

U

sually

15

days

Usually 2 days

1- Preparation

Investors must make sure they have at

least 10% of the total VND value they

want to buy, based on the reference price,

in their capital contribution account in

Vietnam

5a- Winning Bid!!

15 days to pay the balance (90%) to

your auction agent

5b- Loosing Bid

Deposit will be returned to investors by

the company within 30 days from the

IPO closing date, 5-7 days in practice

2- Registration

Investors register with an auction agent by providing

the necessary registration documents, including:

Registration form

Supporting documents (see checklist on page 5-6)

Documents need to be submitted before the time of

registrationas provided in the auction details


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Usuall

y

10

days

3- Processing

When the registration package is

received, the auction agent will process it

and mail the resulting bidding papers to

the investor

4- Bidding

Bidding papers need to be lled and returned

to the auction agent before the time of price

submissionprovided in the auction details

Investors will lose their deposit if their bid

is below the reserve price or if they fail to

bid on time. It takes about 2 days to know

if you won.


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Annexes


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4.2. List of banks offering custody services

HSBC For institutional investors only

The Metropolitain

235 Dong Khoi, District 1, HCMC

Tel: +84 (8) 3829.2288 Ext: 269

Fax: +84 (8) 3822.7380

Direct line: +84 (8) 3520 3269

Head of Securities Services

Mr Puneet Gupta

[email protected]

[email protected]

Deutsche Bank For institutional investors only

Saigon Centre

14F, 65 Le Loi Blvd, District 1, HCMC

Tel: +84 (8) 3829 9000 ext 309

Domestic Custody

Ms Mai Thi Thuy

[email protected]

Citibank For institutional investors only

17 Ngo Quyen, 1F, Hanoi, Vietnam

Tel: +84 (8) 3825 1950, ext 466

Fax: +84 (8) 3936 1247


Ms Susan Kleiman

[email protected]

Standard Chartered Bank For institutional investors only

11F, Vinaconex Tower

34 Lang ha, Dong Da

Hanoi

Tel: +84 (4) 3936 8211

Fax: +84 (4) 3248 4355


Mr Nguyen Trung Toan

[email protected]

Far East National Bank For institutional and individual investors

11F, Vinaconex Tower

34 Lang ha, Dong Da district

Hanoi


Ms Anna Phuong

[email protected]

Bank for Investment and Development of Vietnam (BIDV)

12-14 Nam Ky Khoi Nghia Street

District 1, Ho Chi Minh, Vietnam

Tel: +84 (8) 3821 8812

Fax: +84 (8) 3821 8813

Direct: +84 (8) 3821 8812 ext 110

For institutional and individual investors

Manager, Depository Services

Ms Hong

[email protected]


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4.3. Rights and obligations of investors

4.4. Capital ows

Rights of foreign investors:

Pledge, transfer, trade shares in accordance with prevailing laws and regulations on pledge, enterprise

and securities;

Transfer capital which has been contributed to enterprises or to adjust the investment capital;

Convert the invested capital (both principle and gains), sales proceeds and other amounts derived from

investment activities into foreign currencies for repatriation after fullling all tax obligations;

Be equally treated as local investors when investing in a joint stock company, limited liability company or

partnership company;

Participate in managing the company in accordance with the Enterprise Law and the companys

charter.

Obligation of foreign investors:

Comply with conditions and commitments for capital contribution and share purchase;

Comply with provisions stipulated in the law and the companys charter;

Pay taxes in accordance with prevailing tax regulations; Comply with other relevant laws and regulations.

There are no explicit capital controls in Vietnam. However, availability of foreign currencies is not guaranteed.

There are no FX restrictions or quotas and FX forwards are allowed for genuine underlying transactions. The

SBV xes the USD/VND target rate on a daily basis and the inter-bank market is permitted to trade within a

certain band ( 3% from the target rate at time of writing).

Source of capital

Foreign investors are entitled to purchase securities in Vietnam provided the source of funds is legal, such as:

1. Foreign currency remitted from abroad into Vietnam in accordance with current provisions on foreign

exchange control;

2. Distributed prots of from direct investment activities in Vietnam;

3. Receipts of foreign investors from the transfer, liquidation, dissolution of their direct investment activities

in Vietnam in accordance with provisions of applicable laws;

4. Salaries, bonuses and other legal income of foreign individuals in Vietnam in accordance with provisions

of applicable laws;

5. Other sources if accepted by the State Bank.

Remittances

After having fullled their tax obligations to the State, foreign investors are entitled to purchase foreigncurrency at authorized banks to remit overseas. Custodian banks usually take care of this for their clients.


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4.5. Taxes

4.6. Board membership

Tax laws in Vietnam, as in many countries, are complex. Vietnam has double-taxation agreements

(DTAs) with over 60 countries which do change applicable tax rates for organizations and individuals of

certain countries. Moreover, practices in Vietnam can differ from the letter of the law and are subject to

frequent changes.

VCSC is not a tax consultant and the following is intended for general guidance only and should not form the

basis of any specic decision. Note that DTAs may change the rates described below. Please contact your

tax attorney should you need specic advice.

Whether an investor is entitled to a board seat is entirely subject to the companys charter. In general, with a

stake of at least 10%, investors may request to nominate one (1) person. However, shareholders must vote

in favour of the motion for such a nomination to be accepted.

* Taxes on sales proceeds are levied when investors sell securities only, not when they buy. The tax is

levied automatically by your securities broker or your custodian (varies depending on each situation).

** The same tax rates apply to tax residents and non-tax residents of Vietnam of any nationality. However,Vietnam tax residents (Vietnamese and foreign individuals who reside in Vietnam for 183 days or more in

a scal year) may choose to pay a 20% capital gains tax instead of the 0.1% tax on sales proceeds. That

being said, the amount of paperwork required to take advantage of this tax scheme seems onerous and

we do not believe many individuals will choose such a scheme. You should consult your tax authorities to

nd out how you can benet from such scheme as this is a personal income tax matter and your securities

broker or custodian cannot help.

Foreign institutions

(non-tax resident)

Foreign individuals

(non-tax resident)

(Foreign and Vietnamese residents,

also see note below)**

Equities o Capital gains: 0%

o Cash dividends: 0%

o Cash dividends from listed fundcerticates:

Varies

o Tax on sales proceeds*: 0.1%

o Capital gains: 0%

o Cash dividends: 5%

o Cash dividends from listed fund

certicates: Varies


Bonds o Interest (coupon): 10%


o Interest (coupon): 5%


Money Market o Term deposit: N/A to non-residents

o Certicate of deposit: 10%

o Current account: 10%

o Term deposit: N/A to non-residents

o Certicate of deposit: 0%

o Current account: 0%

Applicable taxesAll taxes are deducted at the source by the issuer or your custodian.


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4.7. Legalization process

If residing in Vietnam

Having your documents recognized and stamped by your home country embassy or consulate in Viet-

nam.

Having your documents authorized by the Ministry of Foreign Affairs (MOFA) of Vietnam in Hanoi or the

External Relations department in Ho Chi Minh City (6 Alexandre de Rhode, D1).

When translation is required (as for the certicate of incorporation); have your documents simul-

taneously translated in Vietnamese & notarized. Contact your local Peoples Committee or send us the

documents and well have it done in Vietnam (service fees apply). Allow 2 week for translation.

Tip: once the translation is done, you should ask your local Peoples Committee for several notarized copies

(stamp is cheap) for future uses youll need them.

If residing outside of Vietnam

Please contact the Embassy of Vietnam in your country for guidance on the exact procedure as it does vary

from one country to the other. For example, the role of MOFA (step 2) is executed by the Department of

State in the USA, the High Court in HK, etc. In some countries, step 2 isnt required. The important is that the

Vietnamese Embassy in your country stamps it.

Having your documents notarized by a notary public in your home country.

Having your documents recognized and stamped by the Ministry of Foreign Affairs (MOFA) of your

home country (or Department of State in the USA).

Having your documents recognized and stamped by the Vietnamese Embassy or Consulate in your

home country.

When translation is required (as for the certicate of incorporation); have your documents

simultaneously translated in Vietnamese & notarized. The consulate or embassy of Vietnam in your

home country should be able to help you with this, or you can send the documents to us and well have

it done in Vietnam (service fees apply). Allow 2 week for translation.

Tip: once the translation is done, you should ask your consulate or embassy of Vietnam in your home coun-

try for several notarized copies (stamp is cheap) for future uses youll need them.


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Viet Capital Securities

67 Ham Nghi, District 1, Ho Chi Minh City, Vietnam

Tel: +84 8 3914 3588

Email: [email protected]

Web: www.vcsc.com.vnBloomberg: VCSC

Institutional Brokerage

Michel Tosto,

[email protected]

Research

Marc Djandji,

[email protected]

Investment bankingHoan Dinh,

Vietnam Securities 2011

Documents

Transcript of Vietnam Securities 2011