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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
12 professional staff,
headed by 10+years CFA
Forward looking
Economics (daily) Sectors (ad hoc)
Companies (frequent)
Strategy (monthly)
Technical Analysis (daily)
Commentary (daily)
ResearchMarc Djandji
Research Access
Analysts calls Corporate access
Model access
Institutional Brokerage
Top 10 market share
Dedicated to serving
institutions worldwide
Brokerage: Listed & OTC Block sourcing / building
Intermediation
Entry / exit advisory
Custody & depository
Flow info (trends)
Institutional BrokerageMichel Tosto
Sales Products
Morning Notes Guide to VN Securities
OTC quotes
Best Equity House
Vietnam, 2011
Best Brokerage House
Vietnam, 2011
Best Equity House
Best Mid-Cap CorporateFinance Vietnam, 2011
Investment banking
Advisor to most of the top
companies
Advisor to most of the majorIPOs and M&As
Leader in ECM and M&A
Restructuration, IPOs
Privatisation
Valuation
Due diligence
Investment bankingHoan Dinh
In-depth Relationships
Companies SBV, SSC, VSD, GSO
HSX, HNX
ASSET
ASI
AN
AWARD
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2010
TRIPL EA
Alpha
SoutheastAsia
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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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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;
Share Transfer Agreement (STA) using the format required by the registrar;
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 Transfer Agreement (STA) using the format required by the registrar;
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
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
Citibank For institutional investors only
17 Ngo Quyen, 1F, Hanoi, Vietnam
Tel: +84 (8) 3825 1950, ext 466
Fax: +84 (8) 3936 1247
Head of Securities Services
Ms Susan Kleiman
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
Head of Securities Services
Mr Nguyen Trung Toan
Far East National Bank For institutional and individual investors
11F, Vinaconex Tower
34 Lang ha, Dong Da district
Hanoi
Head of Securities Services
Ms Anna Phuong
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
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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
o Tax on sales proceeds*: 0.1%
Bonds o Interest (coupon): 10%
o Tax on sales proceeds*: 0.1%
o Interest (coupon): 5%
o Tax on sales proceeds*: 0.1%
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,
Research
Marc Djandji,
Investment bankingHoan Dinh,
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