Suggestions for the Vietnamese market

We were asked by one of our brokers to offer comments on investing and trading in Vietnam, by way of feedback to the State Securities Commission of Vietnam as it considers the development of the Vietnamese capital market. We find the SSC's requests for feedback very encouraging. While there always seems much still to do, we remain impressed by the benefits of incrementalism, and the great strides taken by Vietnam in recent decades, as discussed in the 3Q report. Our suggestions, based on the experience of Apollo Asia Fund and Panah Fund to date, follow the categories requested.

Placements:

• Block placements of government stakes should be professionally handled with a transparent bookbuilding process. Failures such as Vinamilk affect perceptions of the whole market, and could affect investors' future willingness to participate.
• Private placement approvals: proposals, resolutions, and announcements should all be clearly expressed, in Vietnamese and in English. There should be a single version, not three different versions of the resolutions and voting procedures. Companies should work with subcustodians, and not send original documents to the Caribbean or require the underlying fund companies to correspond. Proxy voting through normal intermediaries (eg ProxyEdge) is essential. One experienced fund manager told us that he has never yet received notices in time for official voting.

Information disclosure:

• All public disclosures made to stock exchanges / SSC (financials, company announcements, dealing disclosures...) should be made available on an official website which is accessible outside Vietnam, and permits feeds to Bloomberg etc.
• Announcements should be stamped with date and time, and no substitution of versions should be permitted (ie there should not be multiple versions of the same document).
• When corrections are issued, the details of each correction should be clearly set out.
• For companies issuing partial data ahead of full results release, any discrepancy should be highlighted and explained.
• Full notes should accompany the financials.
• Proposed appropriations to funds for Bonus & Welfare, Board of Directors, Board of Management, Board of Supervisors etc should be published along with the preliminary results for each year: there should not be a two month delay from first publication until accurate calculation of the prior-year EPS becomes possible.
• Appropriations to such funds should be reconciled with drawdowns and balances.
• Selective disclosure should be banned, and sanctions enforced for infringement.
• Annual reports should include details of properties owned/leased (as is the norm in Malaysia and Singapore).
• Simultaneous reporting in Vietnamese and English should be encouraged. This could be phased in starting with the larger companies and those with large foreign shareholdings. Thai listed companies are all required to report financials with full notes simultaneously in two languages and do so without any evident difficulty, and we recommend the SET and SEC Thailand as the region's best role models.

Corporate governance:

• Poll results should be published (total votes cast and the number for & against each resolution), and signed off by a named official from a reputable organisation.
• AGMs require a longer notice period. 3 clear weeks after the publication of the annual report and agenda is a typical requirement elsewhere.
• Front-running is probably already illegal, but appears rife: suspicious transactions ahead of price-moving news should be investigated, with penalties for infringement. Rules on dealing by insiders and related parties require enforcement.

Wishlist:

• Restricted sectors for foreign ownership limits to be clarified. For companies remaining restricted, NVDRs.
• For trades above the 7% limit for price premium, a streamlined and accelerated approval process - no need for man-months and the destruction of forests.

9 April 2017 (submission date 6 April)
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