Hanoi (VNS/VNA) - Delisting shares on the stockmarket is a tool for market regulators to create a transparent investmentenvironment, and filter and remove poor quality stocks that cause marketmanipulation, strengthening investors' confidence in the stock market.

An investor, Nguyen Ngoc Hung, told Vietnam News Agency that businesses whohave shares delisted from the market must be strictly dealt with, but investorswho bought shares of that business would be affected and there should be amechanism to protect them.

According to statistics from the Vietnam Securities Depository (VSD), since thebeginning of this year, 18 companies have cancelled their share listings onHOSE and HNX to switch to the Unlisted Public Company Market (UPCoM). Notably,there are more than 70 enterprises having their status as public companiescancelled and leaving the stock market.

Huynh Anh Tuan, General Director of Dong A Bank Securities Joint Stock Company,said that many of the delisting cases were related to information disclosure,business results seeing losses for three consecutive years, or accumulatedtotal losses exceeding the amount of charter capital.

When a stock is in danger of being delisted, the stock price plummets and willreflect most of the intrinsic value of the business. When transferring thelisting to UPCOM, shareholders will not have much access to information aboutthe business. The UPCOM has low disclosure and financial reportingrequirements. Most new businesses will have to publish financial statementsafter an entire year. However, there are still many businesses seeing theirshares increase after switching to UPCOM.

“Investors must define the purpose to invest in stocks, if it is not clear, itis best to cut losses on delisted shares. If the problems that cause businessesto delist and change the exchange are not so serious, not leading tobankruptcy, there is still hope for investors to wait,” Tuan said.

Lawyer Nguyen Thanh Ha, Chairman of the Board of Directors of SBLAW Law Firm,said that according to current regulations, shares are delisted, but still meetthe condition of a public company, and must register for transactions on theUPCOM system.

Enterprises whose shares are subject to mandatory delisting may only registerto list again after trading for at least two years on UPCOM and fulfilling theobligations of the listing organisation.

After a stock is delisted, two cases occur. With shares that will betransferred to other exchanges after being delisted, if they move to a largerexchange, the number of shares held by investors will be converted to the newexchange and traded normally.

If they are transferred to a smaller market, these stocks can still beregistered for trading to maintain liquidity. However, if an enterprise'sbusiness deteriorates and there is a risk of bankruptcy, the result will be aserious decline in liquidity.

As for unlisted shares that are not transferred to other floors, it is verydifficult for investors to transfer their shares. At that time, there are twoways to protect investors' interests. That is, the company issuing the sharesmust spend money to buy back these shares or the State Securities Commissionwill request that the shares be transferred to an unofficial or secondaryexchange so that investors can continue selling them.

“Shares being delisted does not mean they are no longer valuable. Investorsshould also find out if the business activities of the enterprise are able torecover,” said lawyer Nguyen Thanh Ha.

Deputy General Director of Kien Thiet Securities Company Do Bao Ngoc said thestock market always had a process of screening businesses over time. Onlycompanies with good performance and compliance with securities laws areeligible for long-term listing.

For companies that do not comply with the law, removing them from the listingwould also help reduce risks for new investors, he said.

According to this expert, when a business is delisted, it will negativelyaffect both businesses and investors. Specifically, businesses are adverselyaffected by their reputation and brand image in the eyes of partners andinvestors. The value of shares and the company's capitalisation will decreasesharply when the information is released to the market, he said./.