A shortage of capital will force at least 19 Vietnamese companies to move from the Ho Chi Minh Stock Exchange to the smaller Hanoi bourse as a “first step” to improving the market.


The companies do not meet the exchange’s requirements of having registered capital of at least VND80 billion (US$4.5 million) and have no plans to raise more money, Tran Anh Dao, head of the exchange’s listing office, said in a telephone interview Tuesday. She declined to give a timeframe for the move.


Vietnam is increasing regulation of the nine-year-old exchange to support the market after the VN-Index plunged 66 percent last year. A slowing economy amid a global recession has made it difficult for some companies to raise enough capital.


“We don’t dare commit ourselves to raising new capital as we’re afraid it will be difficult to sign new contracts because of the global financial crisis,” said Phan The Vinh, a spokesman in Ho Chi Minh City at Thu Duc Trading and Import Export Joint-Stock Co., one of the companies that will have to move to the Hanoi Securities Trading Center.


Thu Duc Trading, which trades petroleum, oil, and steel, has capital of VND40 billion, Vinh said.


A further 27 companies have capital of less than VND80 billion, Dao said. One has already raised funds, and 22 have registered with the State Securities Commission to increase capital, she added. Four companies are waiting for a decision from shareholders, she said.


Market restructuring


The shift in some companies to Hanoi “is the first step toward restructuring the market to try to improve it,” Dao said. She declined to give further details.


Vietnam’s economy expanded 3.1 percent in the first quarter, less than half the 7.5 percent pace recorded a year earlier.


The VN-Index on Tuesday advanced 2.4 percent to close at 381.97. The measure, Asia’s worst-performing index last year, touched a four-year low on February 24 and has since rebounded more than 62 percent.


“The move to Hanoi will not affect the market as the companies’ market capitalization accounts for less than 2 percent of the whole HCMC exchange,” Dao said.


Vietnam has 177 companies listed in HCMC, and 182 that trade in Hanoi, according to data compiled by Bloomberg. There are 959 companies that are bought and sold in the over-the-counter (OTC) market, according to the regulator.


As part of plans to increase market regulation, the government will from June 1 raise the limit on foreign ownership of informally traded equities to 49 percent from 30 percent, it said in April.


The country also plans to start a new floor in June to regulate OTC stocks. The exchange will host “fair, safe and stable” trading, the Ministry of Finance said last week.