The Vietnamese government has urged state-owned enterprises (SOEs) to list on a stock market soon after they become public firms, a move analysts say is aimed at increasing liquidity and drawing more foreign investment.
Vietnam's stock market is Southeast Asia's best performer this year, with the Ho Chi Minh Stock Exchange's VN Index, the country's main market, having advanced about 24 percent so far in 2014.
A smaller bourse, with an eighth of the market capitalization of the VN Index, operates in the capital Hanoi.
SOEs must list within 90 days on the UPCoM market, set up for stocks which are not listed on the main markets, from the date they get their new business licence, Prime Minister Nguyen Tan Dung said in a directive signed on Monday.
In Vietnam, initial public offering (IPO) and listing are two separate stages. After conducting the IPO, the new entity is required to list on the main markets within one year, but the rule has not been enforced and the maximum fine for violation is just 150 million dong ($7,000).
SOEs having been converted into share holding firms prior to the directive's effective date will observe the one-year listing rule, said the directive that takes effect on November 1.
"If this time the rule is reinforced correctly, goods on the stock market will be plentiful next year," said Deputy General Director Nguyen Chi Trung of Ho Chi Minh City-based Rong Viet Securities.
"The market size will be good and that will attract more foreign investment as well as raise the ratings of Vietnam's stock market," Trung said.
While the Vietnam market and its cheap stocks have lured many overseas investors, some say only a few dozen equities are seen as attractive now and most are already maxed-out in terms of the 49 percent foreign ownership cap.
Despite a reputation for inefficiency and poor transparency, some SOEs, such as those in telecoms, are seen as attractive because of their virtual monopolies and the preferential treatment they have received, such as low-interest credit.
The latest directive comes as part of planned reforms of hundreds of SOEs that analysts say have been a drain on Vietnam's economy, sapping up half the country's credit but accounting for just a third of annual growth.
Among those expected to list in the next few years are telecoms firm MobiFone, garment maker Vinatex and flag carrier Vietnam Airlines, which are among the most profitable SOEs.
The flip side, however, is that more shares available for trading could dilute investment into stocks, said deputy manager Nguyen Thanh Lam of Maybank Kim Eng Securities.
"I'm worried as stocks on the UPCoM will increase vastly, including a not-so-small amount of good equities, so money could flow partially to the UPCoM market from the Ho Chi Minh Stock Exchange and the Hanoi Stock Exchange," affecting the performance of the latter markets' indices, he said.