Vietnam stock exchange listing: HOSE, HNX and UPCoM compared

Vietnam stock exchange listing runs through three venues: HOSE in Ho Chi Minh City, HNX in Hanoi, and UPCoM, the market for public companies that are not listed on either. One decree sets the basic conditions for a share listing. The exchanges then add their own rules. A company should read both before it picks a venue.

The rules that apply in 2021

Two documents matter most. The first is the Law on Securities, passed by the National Assembly on 26 November 2019. The second is Decree 155/2020/ND-CP, which the Government signed in Hanoi on 31 December 2020. The decree explains how to apply the law.

The decree covers who may list, what a company must file, and what it must disclose once its shares trade. Article 109 sets the conditions for listing shares. Article 110 sets the file a company must submit.

The exchanges add their own rule books on top. A board should read the law, the decree and the rule book of the chosen exchange as one set. Do not rely on a summary alone, including this one.

Sources: Government of Vietnam, Decree 155/2020/ND-CP of 31 December 2020, published on the Government portal (chinhphu.vn), title page and Articles 109 and 110.

The listing conditions in Decree 155/2020

Article 109 of the decree lists the conditions for listing shares. A company must meet all of them:

• It is a joint stock company with paid-in charter capital of at least VND 30 billion, shown in its latest audited financial statements.
• Its market value is at least VND 30 billion, worked out from set price references. These include the average price in its latest public offering, or the average reference price on UPCoM over the last 30 sessions.
• Its shareholders have approved the listing at a general meeting.
• It has traded on UPCoM for at least two years. This does not apply if it has already sold shares to the public, or if it is an equitized state company.
• Its return on equity (ROE) for the year before it applies is at least 5 percent.
• It made a profit in each of the two years before it applies, owes no debt overdue by more than one year, and has no accumulated losses in its latest audited accounts.
• At least 15 percent of its voting shares are held by at least 100 small shareholders. The share falls to 10 percent if charter capital is VND 1,000 billion or more.

Most of these tests can be checked against your own accounts today. If one fails, fix it before you talk to advisers.

Sources: Government of Vietnam, Decree 155/2020/ND-CP, Article 109, clause 1.

Other duties for owners and managers

The decree also sets duties beyond the numbers. Board members, supervisory board members, the chief executive, deputies, the chief accountant and similar officers must promise to hold all of their shares for six months after the first trading day. They then hold half of them for the next six months. Large shareholders linked to these people must make the same promise. Shares owned by the state are not counted.

Neither the company nor its legal representative may have been punished in the last two years for acts the Law on Securities bans. A securities company must also advise on the listing file, unless the applicant is itself a securities company.

Sources: Government of Vietnam, Decree 155/2020/ND-CP, Article 109, clause 1, points dd, e and g.

HOSE, HNX and UPCoM compared

HOSE began as the Ho Chi Minh City Securities Trading Center. It was set up under Decision 127/1998/QD-TTg, opened on 20 July 2000 and held its first trading session on 28 July 2000. It is the older of the two main exchanges.

The Hanoi Stock Exchange was formally inaugurated on 24 June 2009 as a state-owned single-member limited liability company. It replaced the Hanoi Securities Trading Center. HNX also runs UPCoM.

UPCoM launched on 24 June 2009 with 10 stocks. It is the entry point for public companies whose shares are not listed on HOSE or HNX. A public company can trade there in an organised market. Because of the two-year rule above, it is also the usual first step toward a full listing.

Decree 155/2020 says shares are sorted into listing groups using the exchange's own rules. The tests are charter capital, market value, operating history, finances, the base of small shareholders and company governance. So the choice between HOSE and HNX depends on those rule books. Ask each exchange for its current text, and check each figure against your accounts.

Sources: Wikipedia, "Ho Chi Minh City Stock Exchange", for the founding dates; Wikipedia, "Hanoi Stock Exchange", for the 2009 inauguration and the UPCoM launch; Government of Vietnam, Decree 155/2020/ND-CP, Article 109, clause 2.

A simple plan for choosing a market

Match the venue to your numbers. A company with solid capital, steady profit and a wide base of small shareholders can look at a full listing. A younger or smaller public company may start on UPCoM and build a record.

1. Pull your last two years of audited accounts and test them against the conditions above.
2. Count your small shareholders and the share of voting stock they hold.
3. Check for overdue debt and accumulated losses. Either one blocks a listing.
4. Ask HOSE and HNX for their current rule books, and read the law and decree with a securities lawyer.
5. Pick the venue, then plan the timeline backward from the filing date.

Listing is a long process. Start the accounts and shareholder work early, because those two items usually decide the timeline. This is general information, not legal or investment advice.

Sources

Government of Vietnam, Decree 155/2020/ND-CP of 31 December 2020; Law on Securities of 26 November 2019; Wikipedia, "Ho Chi Minh City Stock Exchange"; Wikipedia, "Hanoi Stock Exchange".