At last Friday’s session, around 350 out of over 830 stocks listed on UPCoM, which requires lower transparency standards, registered no trades. In fact, many had not registered trades for months, Hanoi Stock Exchange (HNX) data shows. 

Since January this year, there have been no matching orders of BHT shares belonging to Bach Dang TMC Construction Investment JSC. The company was listed on UPCoM in mid-2018, but less than ten shares had changed hands by the end of that year, with its trading price falling from VND4,700 (20 cents) to VND2,700 (12 cents) per share. 

BHT had previously been listed on HNX since 2011, the smaller of Vietnam’s two main bourses, but had to de-list after suffering continuous losses.

The UPCoM is effectively a  mezzanine exchange, set up to encourage unlisted public firms to participate in the securities market, with a view that they may later transfer to the two main markets HNX or the Ho Chi Minh Stock Exchange (HOSE).

There have been multiple cases where shares had to downgrade from Vietnam’s main exchanges to UPCoM after companies reported continuous losses, then went on to lose their liquidity altogether for extended periods of time.

For instance, STT shares of tour operator Saigontourist Transport Corporation, previously listed on HOSE until early 2013, saw no transactions between May and September this year. Its price is currently VND8,500 (37 cents), down 11.76 percent compared to the beginning of 2019.

BTC shares of Binh Trieu Engineering and Construction JSC have also seen only one single transaction of 100 shares in the last 12 months. It is one of the oldest stocks on UPCoM, having registered to trade there in 2009.

Other stocks having no trades in several months this year include MTG of state-owned natural gas distributor MT Gas JSC, YTC of pharmaceuticals retailer Ho Chi Minh City Medical Import Export JSC, and several stocks of state-owned construction giant Song Da Corporation.

Standards of listing, disclosure and transparency obligations on UPCoM are much lower than the two listed exchanges, so that companies not yet ready to make full disclosures can list.

As a result, a lot of business information investors require are not provided or not updated, so investors find it hard to determine the quality of the stocks. Many investors have a default mentality that stocks on UPCoM are those with low quality, because stocks delisted from HOSE or HNX end up on UPCoM, securities firm BVSC said.

Another reason for low liquidity is that many equitized public enterprises also list on UPCoM, but are not known by the general public, so they do not have any buyers. The market also does not allow certain financial leverage tools, such as margin lending, so investors move to other exchanges instead, BVSC said.