chapter 3

Chapter Securities and Transactions of Stock Market 06/08/2011 B02003 - securities and transactions of stock market Chapter 3: Securities and Transactions of Stock Market 3.1 Joint stock company 3.2 Securities 3.3 Transactions of Stock Market 3.4 Stock index 06/08/2011 B02003 - securities and transactions of stock market 3.1 Joint stock company 3.1.1 Concept 3.1.2 Issuance of securities 3.1.3 Shareholders, rights and obligations of shareholders 3.1.4 Joint stock company management 3.1.5 Classification of stock company 06/08/2011 B02003 - securities and transactions of stock market 3.1.1 Concept of joint stock company • Joint stock company is a business organization, in which the charter capital is divided into equal portions called shares • The shares owners (called shareholders) are only liable for any company debts and the limit of their liability only extends to the face value of their shareholding 06/08/2011 B02003 - securities and transactions of stock market 3.1.2 Issuance of securities Joint stock companies have rights to issue following types of securities: • Common stock • Preferred stock • Bond 06/08/2011 B02003 - securities and transactions of stock market 3.1.3 Share holders, rights and obligations of share holders • • 3.1.3.1 Common shareholders, rights and obligations of common shareholders 3.1.3.2 Preferred shareholders and rights of preferred shareholders 06/08/2011 B02003 - securities and transactions of stock market 3.1.3.1 Common share holders, rights and obligation of common shareholders • Rights of participating and voting at general shareholders‟ meetings (AGM – annual general meeting) • Prior to purchase new shares • Dividend rights • Rights on surplus of assets after dissolution • And some other rights stipulated in enterprise law and articles of association 06/08/2011 B02003 - securities and transactions of stock market Obligation of common shareholders • Paying off the shares committed to purchase • Responsible for debts and assets obligations of the company • Comply with the rules and by laws • Executing decisions made by general Board of Shareholders • Executing other obligations in Enterprise law and in charter of corporation 06/08/2011 B02003 - securities and transactions of stock market 3.1.3.2 Preferred shares and rights of preferred stock shareholders • The voting right of preferred stocks, rights of preference shareholders • Preferred stock dividends, rights of shareholders 06/08/2011 B02003 - securities and transactions of stock market 3.1.4 Structure of joint stock company 3.1.4.1 Structure of joint stock company 3.1.4.2 Management of joint stock company 06/08/2011 B02003 - securities and transactions of stock market Stock listing requirements (HOSEcont.) – At least 20% of the applicant‟s voting shares must be held by at least 100 shareholders; – Members of the Board of Directors, Board of Supervisors, (General) Director and Deputy (General) Director(s), Chief Accountant must undertake to hold 100% of the shares they owned within months from the listing date and 50% of those shares for the following months, excluding the shares held by such individuals as representative of the State owner; – There is a valid application file required by the Exchange 06/08/2011 B02003 - securities and transactions of stock market Corporate Bond listing requirements (HOSE) The applicant must be a joint-stock company or limited liability company or state-owned company with: • paid-up capital recorded in the financial statements, at the time of registration for listing, equal to or over VND 80 billion; • Business performance of consecutive years prior to the time of registration for listing must have been profitable, have no debts which have been overdue for more than one year, and complete all financial obligations to the state; • Bonds of one issue must be held by at least 100 bondholders; • There is a valid application file required by the Exchange 06/08/2011 B02003 - securities and transactions of stock market Public Fund certificate listing requirements (HOSE) • The fund must be close-ended fund with total value (as par value) recorded in the financial statements, at the time of registration for listing, equal to or over VND 50 billion; • Founders and members of the fund‟s Representative Board must undertake to hold 100% of the fund certificates they owned within months from the listing date and 50% of those certificates for the following months; • The fund certificates must be held by at least 100 investors; • There is a valid application file required by the Exchange 06/08/2011 B02003 - securities and transactions of stock market Securities listing requirements on Hanoi Stock Exchange (HNX) • Stock listing requirements • Corporate Bond listing requirements 06/08/2011 B02003 - securities and transactions of stock market Stock listing requirements (HNX) The applicant must be a joint-stock company with: – paid-up capital recorded in the financial statements, at the time of registration for listing, equal to or over VND 10 billion – Business performance of consecutive year prior to the time of registration for listing must have been profitable and have no accumulated loss at the time of listing registration There is no overdue debt over a year and financial obligations to government need to be fulfilled 06/08/2011 B02003 - securities and transactions of stock market Stock listing requirements (HNX) – Shares with voting right of company are held by at least 100 shareholders – Members of the Board of Directors, Board of Supervisors, (General) Director and Deputy (General) Director(s), Chief Accountant must undertake to hold 100% of the shares they owned within months from the listing date and 50% of those shares for the following months, excluding the shares held by such individuals as representative of the State owner 06/08/2011 B02003 - securities and transactions of stock market Corporate Bond listing requirements (HNX) • The applicants must be joint stock companies, limited companies, stateowned enterprises with chartered capital from at least 10 billion VND on the value on account book at the time of registration for listing • Bonds of the same issuance must have the same maturity date 06/08/2011 B02003 - securities and transactions of stock market 3.4 Stock market index 3.4.1 Definition 3.4.2 Simple average price index 3.4.3 Composite index 3.4.4 Some securities indexes of Vietnam 06/08/2011 B02003 - securities and transactions of stock market Definition of stock market index • A stock market index is a number that measures the relative value of a group of stocks As the stocks in this group change value, the index also changes value If an index goes up by 1%, that means the total value of the securities which make up the index have gone up by 1% in value • It is used as a tool to represent the characteristics of its component stocks, all of which bear some commonality such as trading on the same stock market exchange, belonging to the same industry, or having similar market capitalizations 06/08/2011 B02003 - securities and transactions of stock market Simple average price index: ∑ Pit It = x Io ∑ Pio Including: It: Simple average price index in period t Io: Simple average price index in basic period, calculating index Pio: The price of securities i in basic period, calculating index Pit: The price of securities i in period t 06/08/2011 B02003 - securities and transactions of stock market Composite index The total market value of current period Composite index = The total market value of basic period 06/08/2011 B02003 - securities and transactions of stock market x 100 The method which is usually used to calculate composite index is Laspeyres and Paascher: • Laspeyres method is based on the number of stock at basic period: ∑ Qio x Pit It = - x Io ∑ Qio x Pio 06/08/2011 B02003 - securities and transactions of stock market • Paascher method is based on the number of stock at current period ∑ Qit x Pit It = - x Io ∑ Qit x Pio 06/08/2011 B02003 - securities and transactions of stock market 3.4.4 Vietnam securities index: • In Vietnam, VN-index of HCM city stock exchange, HNX-index of Hanoi stock exchange and UpCoM-index are all calculated by the comparison of market price at present moment with market price of stocks at base fare: 06/08/2011 B02003 - securities and transactions of stock market ∑ Qit x Pit It = x 100 ∑ Qio x Pio Including: Pit: The market price of stock i at present Qit: The number of listed stock of stock i at present Pio: The market price of stock i on basic day Qio: The number of stock i on basic day 06/08/2011 B02003 - securities and transactions of stock market .. .Chapter 3: Securities and Transactions of Stock Market 3. 1 Joint stock company 3. 2 Securities 3. 3 Transactions of Stock Market 3. 4 Stock index 06/08/2011 B020 03 - securities and... of stock market 3. 1 Joint stock company 3. 1.1 Concept 3. 1.2 Issuance of securities 3. 1 .3 Shareholders, rights and obligations of shareholders 3. 1.4 Joint stock company management 3. 1.5 Classification... Exchange 06/08/2011 B020 03 - securities and transactions of stock market 3. 2 Securities 3. 2.1 Concept, characteristics, classification of securities 3. 2.2 Share 3. 2 .3 Bond 3. 2.4 Derivative securities